hybrid mortgage

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Hybrid Mortgage

An adjustable-rate mortgage in which the interest rate is locked for a rather long period of time. That is, the interest rate is locked for a certain period, often seven years, at which point it may move either upward or downward. Many hybrid mortgages have interest rate caps to offer further protection to the mortgage holder. The initial interest rate on a hybrid mortgage is often lower than market rates, but it carries the risk that after a certain number of years the interest rate will rise to a point resulting in payments that the mortgage holder will not be able to afford.

Hybrid mortgage.

Sometimes called an intermediate ARM, a fixed-period ARM, or a multiyear mortgage, a hybrid mortgage combines aspects of fixed-rate and adjustable-rate mortgages.

The initial rate is fixed for a specific period -- usually three, five, seven, or ten years -- and then is adjusted to market rates. The adjustment may be a one-time change, or more typically, a change that occurs regularly over the balance of the loan term, usually once a year.

In many cases, the interest rate changes on a hybrid mortgage are capped, which can help protect you if market rates rise sharply.

One advantage of the hybrid mortgage is that the interest rate for the fixed-rate portion is usually lower than with a 30-year fixed-rate mortgage. The lower rate also means it's easier to qualify for a mortgage, since the monthly payment will be lower.

And if you move or refinance before the interest rate is adjusted -- the typical mortgage lasts only seven years -- you don't have to worry about rates going up.

However, some hybrid mortgages carry prepayment penalties if you refinance or pay off the loan early. While prepayment penalties are illegal in many states, they are legal in others.

hybrid mortgage

A mortgage that combines the benefits of an adjustable-rate mortgage and a fixed-rate mortgage,such as adjustable rates in the early years and then an automatic conversion to fixed rates after a stated period of time.For example,the 5/25 (adjustable for 5 years and fixed for 25) and the 7/23.

References in periodicals archive ?
Designed for multifamily acquisitions and refinancings, Freddie Mac's Small Balance Loan Product will offer both fixed-rate mortgages and hybrid adjustable-rate mortgages ranging from $1 million to $5 million.
Rates for five-year and one-year Treasury-indexed hybrid adjustable-rate mortgages also increased on a week-over-week basis, to 4.
For those buyers, Gumbinger suggests hybrid adjustable-rate mortgages (ARMs), which feature a fixed interest rate usually for three, five, seven, or 10 years until they turn into traditional adjustable-rate mortgages.
ACCORDING TO THE MBA, THE BUSH ADMINistration and Congress have taken a significant step toward increasing homeownership in the United States by authorizing the Federal Housing Administration (FHA) to insure hybrid adjustable-rate mortgages.
The six-month LIBOR rate was the most widely used index for subprime hybrid adjustable-rate mortgages (ARMs) and hybrid interest only (IO) loans.
Pool I consists of 3/1 hybrid adjustable-rate mortgages (ARMs).
The collateral consists of traditional and hybrid adjustable-rate mortgages extended to prime borrowers.
The mortgage pool consists of 5/1 hybrid adjustable-rate mortgages (ARMs).
Fitch has also become reasonably comfortable with the increasingly prominent usage of hybrid adjustable-rate mortgages (ARMs) after expressing concern that homeowners may be extending themselves to acquire homes.
Additionally, Fitch expects rating downgrades to slightly exceed upgrades once again in subprime RMBS as more seasoned securities backed by hybrid adjustable-rate mortgages will have less excess interest available for credit enhancement.
Higher mortgage rates would also dampen housing affordability, motivating originators to offer more initially-cheaper floating rate and hybrid adjustable-rate mortgages.
Fitch found that the performance varies significantly by product, with hybrid adjustable-rate mortgages (ARMs) exhibiting the highest rate of delinquencies and fixed-rate mortgages (FRMs) the lowest.