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The Hybrid Loan has become more and more popular since more people are buying and selling their homes within a 3-5 year time frame, instead of a 15-20 year time frame. What are some examples of Hybrid Loans?
What does each Loan Mean? The 3/1 Loan - The loan is set at a fixed rate for 3 years, but eventually changes into an adjustable rate mortgage for 1 year. The 5/1 Loan - The loan is set at a fixed rate for 5 years, but eventually changes into an adjustable rate mortgage for 1 year.
Advantages This type of loan guarantees the rate. It is also ideal for homeowners that are buying and selling their homes within 3-5 years. Disadvantages There is a slight chance that these hybrid loans can also convert into ARMS that are not guaranteed. If you have gone through with the 3/1 or 5/1 hybrid, and cannot keep up with the appropriate (fixed or adjustable) payments for this loan, then this could be a big problem. This also means that this may not be the type of loan for you. Bankapedia's Take There are different types of mortgages out there for you. Be sure to choose wisely, and realize that only two types of loans exist: fixed and adjustable. |
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