What is a hybrid adjustable rate mortgage?

A hybrid adjustable-rate mortgage uses features from a fixed-rate mortgage and an adjustable-rate mortgage. A fixed-rate mortgage will have an interest rate that remains the same throughout the life of the loan. An adjustable-rate mortgage is an interest rate that is subject to increase or decrease once a year based on the prime rate index. The hybrid mortgage has a rate that is fixed for a specific amount of time, and once that time has expired, the mortgage will convert to an adjustable rate. Common hybrid mortgages include 3/1, 5/1, 7/1 or 10/1 ARMs. The first number indicates how many years the mortgage will stayed fixed. The second number lets you know that the rate will adjust once a year for the remainder of the loan.

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