A Hybrid Mortgage (also called a Combination Mortgage) is a combination of a fixed-rate mortgage and a variable-rate mortgage where one portion of the mortgage is fixed and the other is variable. This type of rate can be split 50/50 but does not always have to be the case. A Hybrid can also have different terms, depending on the rate you want, for example, you can have a 3 year variable rate and a 5 year fixed rate. According to the CAAMP, in 2012 the percentage of new hybrid was at 11%, that’s up from 8% in 2011. In the Spring 2013 CAAMP/Maritz Study the percentage of hybrid mortgages were at 7%.
Is a Hybrid Mortgage for you?
There are advantages and disadvantages to the Hybrid Mortgage when deciding if a hybrid is right for you. Many lenders offer this type of mortgage and may have different terms and conditions, so ensure you talk to your Mortgage Broker of the advantages and disadvantages of the Hybrid Mortgage, but here we list a few to get you started.
• A happy medium for mortgage seekers who cannot decide between a fixed or variable rate.
• A fixed mortgage rate type gives you some protection in case interest rates go up, and the variable rate type gives partial benefits if rates fall.
• Not transferable to other lenders
• If terms are staggered and one ends and wish to change lenders, you may incur a penalty.
We hope we’ve answer your question what is a hybrid mortgage and were able to assist you in your understanding. Be sure to come back next week for our discussion on HELOC, Home Equity Line of Credit. See you next week!