hybrid mortgage

(redirected from Hybrid Mortgages)

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 ?
Could this be the year to check out hybrid mortgages, which haven't been popular lately?
March 24 /PRNewswire/ -- Bank of America announced it will look first at principal forgiveness - ahead of an interest rate reduction - when modifying certain subprime, Pay-Option and prime two-year hybrid mortgages qualifying for its National Homeownership Retention Program (NHRP).
Myth 7: Subprime borrowers with hybrid mortgages were offered (low) "teaser rates"
Borrowers with hybrid mortgages do tend to prepay and default more often than those with FRMs (see Demyanyk and Van Hemert, 2008, for supporting evidence); however, ceteris paribus, the sole fact that a mortgage loan is a hybrid is not a strong predictor of default.
There's a lot of territory in the middle occupied by hybrid mortgages and these loans are a better alternative for the majority of borrowers that expect to move within 10 years,'' he said.
Called convertible or hybrid mortgages, they're a little less common than the other two types - but you may find they're worth looking into.
Several overseas lenders offer hybrid mortgages where part of the loan is on a fixed rate, and the remainder on a variable rate.
We believe that homeowners with adjustable-rate and hybrid mortgages are generally self-selected borrowers with shorter time horizons who are expected to exhibit more rapid housing turnover levels.
The only impact it will have is more buyers will choose to finance with ARMs (adjustable rate mortgages) or hybrid mortgages.
com discusses the potential advantages of adjustable rate mortgages and hybrid mortgages (fixed for a period before switching to adjustable) with interest rates based on the LIBOR index.
The most common type of mortgage issued in recent years has been dangerous hybrid mortgages, which begin with a fixed-rate, but shift to a much higher adjustable-rate with multiple interest rate increases.
This is because homeowners with adjustable-rate and hybrid mortgages are generally self-selected borrowers with shorter time horizons who are expected to exhibit more rapid housing turnover levels.

Full browser ?