(a) Home loan contracts to which this chapter applies may provide for the payment of a fixed rate of interest, a variable rate of interest, or any combination of fixed and variable rates in any sequence, subject to subsection (b).
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Terms Used In Tennessee Code 47-15-104

  • Contract: A legal written agreement that becomes binding when signed.
  • Fixed Rate: Having a "fixed" rate means that the APR doesn't change based on fluctuations of some external rate (such as the "Prime Rate"). In other words, a fixed rate is a rate that is not a variable rate. A fixed APR can change over time, in several circumstances:
    • You are late making a payment or commit some other default, triggering an increase to a penalty rate
    • The bank changes the terms of your account and you do not reject the change.
    • The rate expires (if the rate was fixed for only a certain period of time).
  • Home loan: means a loan which is:
    (A) Secured by real estate owned and occupied by the borrower for family residential purposes and which may include not more than three (3) additional residential units. See Tennessee Code 47-15-101
  • Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
  • Statute: A law passed by a legislature.
  • Variable Rate: Having a "variable" rate means that the APR changes from time to time based on fluctuations in an external rate, normally the Prime Rate. This external rate is known as the "index." If the index changes, the variable rate normally changes. Also see Fixed Rate.
(b)

(1) A contract may provide for a fixed rate of interest:

(A) Permissible at the time the contract to make the loan is executed;
(B) Permissible at the time the loan is made;
(C) Permissible at the time the interest rate on the loan is converted from a variable to a fixed rate, or from one fixed rate to another fixed rate, whether such conversion is by terms of the contract or by renewal, modification, extension or otherwise;
(D) Permissible at the time of any renewal or extension of the loan or any note evidencing the loan; or
(E) Permissible by virtue of any combination of any of the foregoing.
(2) A contract may provide for a rate of interest that may vary from time to time at such regular or irregular intervals as may be agreed by the parties; provided, that such variable rate shall not exceed the greater of:

(A) That authorized by statute at the agreed time of each variance; or
(B) That authorized at the time of execution of the contract or note evidencing the indebtedness upon which such variable rate is or is to be charged.
(3) The parties may agree to a minimum fixed rate of interest to be applicable to a rate which is or may become otherwise variable; provided, that such agreed minimum fixed rate of interest does not exceed the rate permitted at the time the contract to make the loan is executed, or at the time the note is executed, or at the time of any renewal or extension thereof, whichever is greater.
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