What is an ARM Mortgage?
An adjustable-rate mortgage (ARM) is a type of loan where the interest rate changes over time based on market conditions. The initial interest rate on an ARM will usually be lower than a fixed-rate mortgage, but after that initial period, the rate could go up or down depending on the market.
How Does a Hybrid ARM Work?
A hybrid ARM takes elements from both fixed-rate and adjustable-rate mortgages and combines them into one loan product. With this type of loan, you get a fixed rate for an initial period—usually three years—and then your interest rate adjusts annually after that period ends. This means you get some stability in terms of your monthly payments during the initial period without having to commit to a long-term fixed-rate loan. After that point, you still have some control over your payment since your rate won't adjust too much year over year due to limits placed on how high or low it can go.
Benefits of Hybrid ARMs
The greatest advantage of hybrid ARMs is their flexibility. You don't have to commit to either a fully fixed or fully adjustable rate mortgage; instead, you get the best of both worlds with each initial period allowing you to plan ahead with some certainty while also having some control over your payment after that point should rates change drastically in either direction. Additionally, since hybrid ARMs usually start off with lower interest rates than fixed mortgages do, borrowers can save money initially when compared to other types of loans.
Hybrid ARMs are an attractive option for homebuyers who want the peace of mind offered by a fixed-rate mortgage but aren’t ready to commit to one for an extended period of time. They offer more flexibility than either traditional fixed or adjustable mortgages and often come with lower initial rates as well making them attractive options for potential homeowners looking for something different than either traditional option provides.
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FHA home loans are mortgages which are insured by the Federal Housing Administration (FHA), allowing borrowers to get low mortgage rates with a minimal down payment.
The most common type of loan option, the traditional fixed-rate mortgage includes monthly principal and interest payments which never change during the loan’s lifetime.
Low Down Payment
Loans where the borrower is able to wrap many of the costs and closing costs into the loan, lowering the amount needed to close.