Hybrid ARM

What they are and what it means to you

The hybrid ARM offers the consumer an interest rate that is fixed for an initial period of time. Then it readjusts over the remainder of the life of the loan.

 

Advantages of Hybrid ARMS

  1. Low-interest rates the borrower benefits from during the initial fixed period
  2. Great choice for individuals who plan to sell their homes within seven to ten years since Hybrid ARMS provide a combination of safety and savings that many homeowners find too attractive to pass up.

Disadvantages of Hybrid ARMS

Fluctuating rates may affect the borrower in one of two ways:

  1. If rates increase when the fixed rate period is over, the borrower could end up with significantly higher payments.
  2. If the rates drop down while the borrower is in fixed rate period, he or she would be unable to take advantage of the lower rate.

For more info, please see: Principles of Real Estate-Book 2, Champion School of Real Estate, page 68