What Is a Hybrid ARM and Is It Right for You?
fixed-rate and adjustable-rate mortgages into one mortgage option. Similar to adjustable-rate mortgages, hybrid ARMs offer lower interest rates. However, they also include a fixed monthly payment for an extended period of time like a fixed-rate mortgage would which allows for consistent payments for easy budgeting. Essentially, a hybrid ARM offers a fixed rate for a predetermined amount of time and then becomes an adjustable-rate mortgage for the remainder of the loan’s term. Hybrid ARMs are also often referred to as a 3/1, 5/1, 7/1, or 10/1 mortgage in reference to the amount of years the loan has a fixed rate mortgage. For example, a 3/1 loan will have a fixed monthly payment and interest rate for the initial three years of the loan before it becomes an adjustable rate loan. The second number, refers to how often the rate will be adjusted. For a 3/1 loan, the rate will adjust annually. Once the initial fixed-rate term is up, the mortgage’s interest rate can change monthly, quarterly, annually, or every few years, depending on the economic conditions.
Is a hybrid ARM right for you?
Hybrid ARM loans are an ideal option for homeowners who are expecting to move or refinance their loan either before or quickly after the fixed-rate period of the loan ends—such as fix-and-flip investors. Those looking to sell their home quickly may be able to avoid the ARM period altogether. For such people, the benefit of a smaller upfront payment that hybrid ARMs often provide may be worth the risk of a potentially larger payment in the future. In such a situation, it is imperative to have a strong understanding of the housing market in your area to help ensure that you’re able to sell your properly in the intended timeframe. Now that you’ve learned what a hybrid ARM is, if you’ve decided it’s right for you, Streamline Mortgage can help provide you with a favorable loan option. We are a private lender in Nevada that specializes in real estate loans. You can count on us to provide you with the best rate you qualify for and mutually beneficial terms and conditions. For fast, easy, and affordable loans, apply online at Streamline Mortgage today.