Mortgage Loans: When to Get a Hybrid Loan?

Hybrid mortgage loans are adjustable rate mortgages that are guaranteed not to adjust for a fixed period of time. The amount of time that the interest rate on a hybrid loan remains steady depends upon the lender and the terms of the loan. Given the risk of the interest rate adjusting to high levels after the grace period, hybrid mortgages aren’t for everyone.

When You Plan to Sell Your Home

If you don’t plan to stay in your home for longer than the initial fixed interest period on your mortgage, opting for a hybrid loan may be a smart financial decision. Because the interest rates on these loans often start out lower than fixed interest rates, accepting a hybrid loan until you sell your home can give you lower mortgage payments and help you save money.

If You’re Rebuilding Your Credit

Less than perfect credit can result in lenders offering you fixed mortgage rates you can’t comfortably afford. In this case, accepting a hybrid loan allows you to enjoy a lower interest rate on your mortgage while you work to rebuild your credit. Once you improve your credit score, you can refinance your home into a fixed-rate mortgage-dropping the hybrid loan and the risk of adjustment.