Is Hybrid Mortgage Worthless Or Not?

General Faizal Garasia 9 Nov


Are you the type of person who just sticks with one plan and go along with it or one of the many that struggles with what to choose? Or are you the type of person from a few who chooses both, diversifies financial possessions, and puts your eggs in different baskets?

As hybrid mortgage products become more and more popular among borrowers, lenders, banks, mortgage brokers, and financial institutions, should we even consider getting one, or is it worthless based on our preference?  Here are some pieces of information that could be beneficial on your mortgage journey.

Fixed Prime Rates

This mortgage product refers to a long term fixed rate and fixed monthly payments for the entire life of the loan. Borrowers are unaffected by the impacts of interest rate fluctuations.

Borrowers would not have to worry about the changes, the fluctuation of interest rates and mortgage payments as they are fully aware of the stability of a fixed-rate mortgage.

Variable Interest Rates

This mortgage product refers to a type of home loan which does not have a fixed interest rate for a period of time. The interest rate in this type of product may go up or down depending on the market situation.

When the rate increases, your payments will be allocated more on the interest portion while when rates decrease, your payments will be allocated more on your principal amount portion.

Hybrid Home Loan

Fixed-period ARM, Hybrid Adjustable Rate Mortgage, Hybrid ARM, or commonly known as Hybrid Mortgage allows you to split your mortgage term within your preferred number of years.

Your Choice

Choosing a hybrid product, you could put half of your mortgage term in a fixed interest rate while the other half is for your variable rate mortgage resulting in a combined type of mortgage rate portion within a scheduled term.

Mix and Match

Most of the time, hybrid mortgage products do not necessarily require a 50/50 mortgage portion. Usually, some of them are personalized and let you incorporate contract lengths as you want.

For instance, you could put one-third in a long variable rate and two-thirds in a short term. You could merge and combine your hybrid home loan as you see fit with certain banks, lenders, mortgage brokers, credit unions, and financial institutions.

Safe Zone

The hybrid mortgage’s sole purpose is to elude and avoid your exposure to unanticipated sudden interest-rate fluctuations and swings.

If variable rates spike up, you’ll feel less financial damage when you allocated half of your term in a long term fixed rate rather than having it on the entirely variable or shorter term. On the other hand, if rates dropped drastically, you will still enjoy the part and benefit of being in the safe zone.

Is It Good For You?

Hybrid mortgage works best for borrowers who indecisive between fixed and variable rates. Someone who is having sleepless nights worrying when interest rates might shoot on an uncertain occurrence. Someone thinking about paying a penalty when there is a possibility for their mortgage to break early. Or when someone has a partner or loved one who has a lower risk tolerance than you.

Final Thoughts

Life has it’s own uncertainties. Achieving a milestone such as becoming a homeowner where you are just starting your mortgage journey, it could be a hard and long one. No one on earth could easily predict where interest rates could go.

When having a hybrid mortgage home loan and taking it into consideration could be a worthwhile financial decision for you and your family in the long run. Regardless of whether interest rates could go up or down, movements matter less or should not matter at all when you are having this mortgage product.

If you are a financially secured borrower and you’ll approach this method with a risk-tolerant attitude, bonded with organized behavior for documents and files required. You’re better off with standard mortgages that offer lower rates but if you’re the opposite, a hybrid mortgage is good to look for – so choose wisely.