If you’re looking into buying a home, you’ve probably noticed that there are several different types of mortgages available. Two of the most basic are fixed rate and adjustable rate mortgages, or ARMs. You also have the option to choose a hybrid mortgage.
What is a hybrid mortgage? It’s a mortgage that has qualities of both fixed rate mortgages and ARMs. With a hybrid mortgage, you’ll be paying a fixed interest rate for a certain period of time. Once this time is up, your mortgage will switch to an adjustable interest rate for the rest of the loan’s duration. The period of time for the fixed interest rate can range from three years to ten years. There’s also an option to do an interest-only hybrid loan that has you only making interest payments for a certain period of time before you start making payments on the principal balance.
What are the advantages of a hybrid mortgage? You’ll know exactly what your payments will be during the fixed interest rate period, so you can budget accordingly. While your payments will change once the rate switches to an adjustable one, ARM interest rates are usually lower than fixed ones.
Should I apply for a hybrid mortgage? A hybrid mortgage isn’t for everyone. It’s ideal for buyers who don’t plan on keeping the home once the fixed rate period of the loan is over. A hybrid mortgage gives buyers a chance to pay a fixed rate that’s a bit lower than typical fixed rates. Buyers can then sell the home before the adjustable rate period kicks in.
Need more information for understanding what is a hybrid mortgage? I invite you to give me a call!
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