Hybrid ARM

A hybrid ARM is a type of adjustable-rate mortgage (ARM) that combines features of both fixed-rate and adjustable-rate mortgages. With a hybrid ARM, you will have a fixed interest rate for a certain period of time, typically 5, 7, or 10 years. After that, your interest rate will adjust based on an index, such as the LIBOR or the Prime Rate.

There are two main types of hybrid ARMs:

• Fixed-period hybrid ARMs: With a fixed-period hybrid ARM, your interest rate will remain fixed for a certain period of time, such as 5, 7, or 10 years. After that, your interest rate will adjust based on an index, such as the LIBOR or the Prime Rate.
• Balloon hybrid ARMs: With a balloon hybrid ARM, your interest rate will remain fixed for a certain period of time, such as 5, 7, or 10 years. After that, your interest rate will adjust based on an index, such as the LIBOR or the Prime Rate. However, at the end of the fixed-rate period, you will have to make a large balloon payment, which is typically equal to the remaining balance of your loan.

Hybrid ARMs can be a good option for borrowers who want the predictability of a fixed-rate mortgage for a certain period of time, but who are also willing to accept the risk of an adjustable-rate mortgage after that. However, it is important to carefully compare the different types of hybrid ARMs before you decide which one is right for you.

Here are some of the pros and cons of hybrid ARMs:

Pros:

• Hybrid ARMs can offer lower interest rates than fixed-rate mortgages.
• Hybrid ARMs can provide flexibility if interest rates rise.

Cons:

• Hybrid ARMs can have higher interest rates than adjustable-rate mortgages.
• Hybrid ARMs can be more risky than fixed-rate mortgages.

Ultimately, the decision of whether or not to get a hybrid ARM is a personal one. You should carefully weigh the pros and cons before you make a decision.