A Puerto Rico Adjustable Rate Rider (ARR) — Variable Rate Note is a document that outlines the terms and conditions of a loan for a property in Puerto Rico, particularly focusing on the interest rate. This type of document is commonly used in real estate transactions to provide flexibility for borrowers by allowing the interest rate to change over time. The Puerto Rico Adjustable Rate Rider — Variable Rate Note is specifically designed for borrowers in Puerto Rico, where the local economic and market conditions may be different from other regions. It takes into account the unique factors that may impact the interest rates in Puerto Rico, such as government policies, inflation rates, and economic indicators specific to the territory. The adjustable rate rider allows borrowers to initially secure a lower interest rate compared to fixed-rate loans. However, the interest rate on the loan is not fixed and can fluctuate over the life of the loan. The fluctuation is based on an index, typically the Puerto Rico Adjusted Prime Rate Index, which reflects the prevailing interest rates in Puerto Rico. There are different types of Puerto Rico Adjustable Rate Riders — Variable Rate Note that borrowers may encounter. These include: 1. Puerto Rico LIBOR Adjustable Rate Rider — Variable Rate Note: This type of adjustable rate rider uses the London Interbank Offered Rate (LIBOR) as the index for determining changes in the interest rate. LIBOR is an international benchmark interest rate, widely used in financial markets. 2. Puerto Rico T-Bill Adjustable Rate Rider — Variable Rate Note: Instead of using an index based on prime rates, this type of adjustable rate rider employs Treasury bill rates as the basis for interest rate adjustments. Treasury bill rates are determined by the U.S. Department of the Treasury and reflect the yields on short-term government securities. 3. Puerto Rico Cost of Funds Adjustable Rate Rider — Variable Rate Note: This adjustable rate rider considers the cost of funds index when determining changes in the interest rate. The cost of funds index reflects the average interest rates paid by financial institutions in Puerto Rico to attract deposits. 4. Puerto Rico Indexed Rate Adjustable Rate Rider — Variable Rate Note: This type of adjustable rate rider uses an indexed rate, such as the Consumer Price Index (CPI), to adjust the interest rate. The indexed rate reflects changes in the general level of prices for goods and services in Puerto Rico. In conclusion, a Puerto Rico Adjustable Rate Rider — Variable Rate Note is a legally binding document that outlines the terms and conditions of a loan for a property in Puerto Rico, where the interest rate can change over time. It provides borrowers with flexibility and takes into account the unique economic factors in Puerto Rico. Different types of adjustable rate riders may exist, including those based on LIBOR, T-Bill rates, cost of funds index, or an indexed rate tied to the CPI.