Hybrid Mortgages Gain Again in Popularity
As mortgage rates continue to climb, many home buyers and homeowners are looking for alternative ways to keep their interest payments as low as possible.
Re-enter the Hybrid Mortgage – a fixed/ adjustable rate combination loan that was popular last time interest rates were north of 5%, …and now making a comeback.
What exactly is a Hybrid Mortgage?
A Hybrid Mortgage, as its name suggests, combines the best features of both the fixed and adjustable loan into one attractive loan program. It starts off like a typical fixed-rate mortgage, with a stable interest rate for up to 10 years, after which it converts to an ARM, with the rate adjusting yearly.
Benefits of a Hybrid loan:
- Initial fixed interest rate is below standard fixed rates
- Interest rate is set for a specific period to allow for less market risk
- Fixed term can be set to match financial goals
As an example, a 7/1 Hybrid Mortgage carries a fixed interest rate for the next 7 years, adjusting yearly thereafter – a popular loan for homeowners looking to fund college costs and then down size.
The interest rate on a 7/1 Hybrid loan is typically .50% lower than a traditional 30-year fixed loan. This spread, of course, depends on market conditions and other qualifying factors.
You might consider a Hybrid Mortgage if;
- You plan to move in the next 5 to 10 years
- You only need the mortgage for a short period of time
- Your income will be increasing substantially
- Most of your income comes in the form of a year-end bonus
- You will be downsizing in the next 5 to 10 year
American United offers Hybrid mortgages with 3/1, 5/1,7/1, and 10/1 fixed options. We also have a unique Jumbo 15/1 option, where the interest rate is fixed at a below market rate for 15 of the next 30 years!
In today’s rising interest rate market, Hybrid loans are worth consideration.
To see if a Hybrid Mortgage is right for you, feel free to call or email me today. My team and I welcome the opportunity to be of service – joe
Joseph M. Farella
Executive Vice President ~ Mortgage Banking Division
American United Mortgage Corporation
210 Haven Avenue | Scotch Plains, NJ 07076