Hybrid Adjustable Rate Mortgage (ARM)

In the past two blogs I discussed several loan products most commonly found in today’s mortgage environment.  Depending on ones personal finances or goals, there are some other loan products that one might also consider.  These products will finish my discussion pertaining to adjustable rate mortgages (ARM).

Hybrid Adjustable Rate Mortgage (ARM):

This product is basically a regular ARM (which I have discussed in great detail in my blog titled Loan Products Part II) and is a loan with both fixed and adjustable rate features.  The common notations are either a 3/1 ARM or a 5/1 ARM.  This means that the note rate is fixed for the first 3 years (3/1 ARM), then adjusts every year thereafter.  This type of loan might be considered for various reasons including someone not planning on keeping their loan longer than the fixed rate period (due to them selling the property or refinancing the loan), a decreasing interest rate environment, a lower offered interest rate compared to a fixed product, etc.

Two Step Mortgage:

With a two step mortgage there is one payment fixed for a set period of time and then the payment adjusts to another fixed payment for all subsequent years.  For instance, on a 30 year term the first five years the fixed payment might be $1,000 and then the remaining 25 years in might adjust to a fixed payment of $1,375.  This type of loan might be considered when someone is expecting their income to increase in the short term or maybe doesn’t plan on keeping their loan past the payment adjustment period.

Convertible ARM:

A convertible ARM is a loan product that gives one the option to convert to a fixed rate product by a certain agreed upon date.  Typically, ARM’s are best considered when rates are high and will probably go lower.  Therefore, a convertible ARM might give one the ability to convert to a lower fixed interest rate than what was available at the time the loan was originated.

Not sure who to call or where to start? Contact me today for a 100% free no-obligation loan inquiry analysis.

Matt Pell,  Loan Officer
Mortgage Warehouse, LLC
(239) 672-8502 – Direct Line
(239) 344-9223 – Fax
Matt@mortgagewarehouse.com
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