Combination Rate Mortgages Explained
Combination rate mortgages combine elements of both fixed interest and adjustable interest mortgages. These loans are also called hybrid loans or fixed period ARMs.
- During the initial fixed period, the interest rate is fixed (it remains the same).
- During the fixed period, your monthly payment does not change.
- During the remaining years of the loan, your interest rate becomes adjustable and your monthly payment can vary.
Reasons to Consider a Combination Rate Mortgage:
- You want the stability of a fixed principal/interest payment in the short term.
- You want to help repair your credit by demonstrating your ability to make timely regular payments, then eventually refinance for a lower interest rate.
- You plan to stay in your home or keep your mortgage for less than or no more than the fixed period of the loan.
- You want to possibly increase your borrowing power and get a slightly lower monthly payment than a standard fixed rate loan.
What are some benefits of combination rate mortgages?
During the first several years, combination rate loans typically have lower interest rates than fixed rate loans. Monthly payments are lower and you may be approved to borrow higher amounts.
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