There are several different home mortgage financing options out there, and one of the more popular is the hybrid ARM. This is an adjustable rate mortgage that also combines with it some features of a fixed rate mortgage. Most of the time, a hybrid ARM works like this: You start out with a fixed rate on your home loan, and after anywhere between 3 and 10 years (usually on the low end, right around 5 yers) your home mortgage switches to a variable rate.
A hybrid ARM has appeal to some because it allows them a lower interest rate than they would normally get (home mortgage lenders try to make it look like a good deal). And, if you are not planning to stay in the home for a while, a hybrid ARM is not always a bad thing. As long as you can sell your home down the road.
The hybrid ARM home loan option is certainly better than an interest-only home loan, in which you do not gain any equity, but at the end of your fixed period, things can get expensive if interest rates have gone up. Your best option is to get the hybrid ARM if it is your only choice, and then as your credit improves and you build some equity (but it won’t be much), try to refinance into a fixed rate loan for the long haul.
Banking Law Professor has news on the hybrid ARM and Congress.
Tags: home loan, home mortgage, home mortgage financing, finances,
adjustable rate mortgage, hybrid ARM
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