Under a variable rate mortgage, which of the following may occur?

A variable rate mortgage, also known as an adjustable-rate mortgage (ARM), features an interest rate that is not fixed and can change at specified intervals based on market conditions or a benchmark index. This variability in the interest rate directly impacts the monthly payments. As the interest rate fluctuates, the monthly payment amount may go up or down depending on whether the rate increases or decreases. This characteristic allows borrowers to potentially benefit from lower rates during economic downturns but also carries the risk of increased payments if rates rise.

The other options do not accurately represent the features of a variable rate mortgage. The term of the loan is typically fixed and does not change due to the interest rate (which negates the first choice). The principal amount of the loan remains constant unless additional payments are made or if the borrower refinances (which dismisses the third choice). Furthermore, the total amount of interest charged over the life of the loan is not fixed; it can vary depending on the rate changes (disregarding the fourth choice).