Whichever is the case, interest-only mortgage rates are always tied to the libor index. The libor index of interest-only mortgage rates stands for London Interbank Offered Rate. LIBOR is the interest rate offered by a specific group of banks in London for matured U.S. dollar deposits. Choosing libor index as basis for your interest-only mortgage rates entitles you to a number of benefits. The idea behind interest-only mortgages was spawned from the more flexible and more inventive jumbo mortgage markets. Because of this, interest-only mortgages are traditionally a loan type preferred by savvy investors and well-heeled clients who want to use the principal portion of their payment on other more productive investments. As a result, the investors would demand higher mortgage interest rates from their lenders. To sell their loans, lenders will increase their mortgage interest rate yields. This drives mortgage interest rates even higher. When the economy goes down on the other hand, the same thing happens with mortgage interest rates, but in reverse. For instance, your credit history is not that great. Banks generally reject mortgage applications if the credit score is below 670. With a mortgage broker, you can shop around for a lending company that offers bad credit mortgage loans. In looking for the mortgage that's right for you, make your choice based on the best mortgage terms a lender can offer you. If you pay a second mortgage loan that has a shorter term, the monthly payments may be too high. Payment Calculations for Second Mortgage Loans Before taking on second mortgage loan, be sure that you understand a couple of things first. Know how much your monthly payments will be for that second mortgage loan. Prime (4.25%) is less 1.40% for 6 months followed by prime less 0.40% for the remainder of the term. The 3-month variable rate mortgage on the other hand has prime less 2.25% for 3 moths followed by Canadian Bank Prime less 0.375% with 1% cash back and airmiles. Variable Rate Mortgage by Scotiabank The Scotia Ultimate Variable Rate Mortgage offers their consumers a Cap rate guarantee.