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 beingan adjustable rate mortgage. Hybrid loans are useful if you don't intend to keep your loanfor more than 5 to 10 years. Another similar loan is the 7/23. These loans are initiallyfixed rate loans for the first 7 years and then have a one time adjustment, and stayat the new adjusted rate for the remaining 23 years.
The more time before the interest rate adjusts to an adjustable rate loan thehigher 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 traditional30-year fixed rate mortgage. Hybrids will also have a higher adjustable interest ratethan a traditional adjustable rate loan since the interest rate stays locked in forsome time.
To consider a hybrid, you should see if you will be moving before the initialinterest rate expires. This way you can potentially save money versus a traditionalfixed rate mortgage. However, if you plan to stay in your home after the initialinterest rate period then you might face the risk of rising payments due to theadjustable rate.
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