Hybrid Home Loan

Hybrid home loans are a combination of a fixed rate mortgage and an adjustable rate mortgage. They start out as a fixed rate mortgage and then after a set amount of time switch to being an adjustable rate mortgage. Hybrid loans are useful if you don't intend to keep your loan for more than 5 to 10 years. Another similar loan is the 7/23. These loans are initially fixed rate loans for the first 7 years and then have a one time adjustment, and stay at the new adjusted rate for the remaining 23 years.
The more time before the interest rate adjusts to an adjustable rate loan the higher the interest rate will be. However, the starting interest rate of a hybrid adjustable rate mortgage is usually lower than the interest rate of a traditional 30-year fixed rate mortgage. Hybrids will also have a higher adjustable interest rate than a traditional adjustable rate loan since the interest rate stays locked in for some time.

To consider a hybrid, you should see if you will be moving before the initial interest rate expires. This way you can potentially save money versus a traditional fixed rate mortgage. However, if you plan to stay in your home after the initial interest rate period then you might face the risk of rising payments due to the adjustable rate.

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