Also referred to as the delayed first adjustment ARM (adjustable rate mortgage), a hybrid loan features a fixed rate of interest for a set number of years before changing into a traditional ARM for the remaining amortization schedule. As with all types of home mortgage products, hybrid loans come with positives and negatives. Here's a rundown of the particulars of most hybrid mortgages and what you can expect. First time home loans and interest only home loans can be such types.
Hybrid Loan Details :
» The Fixed Period. Just as the name implies 7/1 ARM has a fixed rate for two, three, five or seven years, respectively. Once this fixed period ends, the home loan will reset based on the conditions of the remaining term. You can always refinance at this point.
» The Adjustable Period. If you don't refinance, your mortgage will enter into its adjustable rate period. The rate will adjust at regular intervals following the fixed period and is based on the prevailing market rates.
» Why Choose a Hybrid? A hybrid home mortgage allows you to choose how much fixed rate and how much adjustable rate mortgage you're looking for. In general, the shorter the fixed period, the lower percentage rates you will pay. For example a 3/1 ARM has a lower start rate than a 10/1 ARM.
source : http://www.loanpage.com/
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