In today's market, interest rates are higher than they have been in recent years. This means that monthly payments for a traditional 30-year mortgage are getting harder and harder for first-time homebuyers, real estate investors, and property owners with adjustable rate mortgages to make.
A new product is making monthly mortgage payments safe and affordable for people who have paid their bills on time for the last two years and have credit scores above 620. This is good news for people who already own a home or want to buy one.
Hybrid Arms
Like Option-Arm mortgages, Hybrid-Arm mortgages give you four different ways to pay each month. This is what you can do:
- A minimum payment can lead to a negative amortisation if it is the only payment made.
- 30 - 40 year Amortized Payment: Payment toward the principal and interest based on a 30 or 40 year term
- 15 year Amortized Payment: Payment toward the principal and interest based on a 15-year term
- Interest Only Payment: Only the interest on the loan is paid.
The main difference between an Option-Arm mortgage and a Hybrid Arm mortgage is how long the minimum payments and interest rates are fixed in a Hybrid Arm mortgage.
Most option-arm mortgages have fixed interest rates that stay the same for 1 to 3 months. Hybrid Arms, on the other hand, have fixed interest rates that range from 1 to 7 years.
This means that homeowners can now get the benefits of Option-Arm mortgages as well as the security of mortgages with longer terms.
For instance, a homeowner with a $200,000 mortgage with an adjustable rate for 5 years pays $1,467.00 before taxes and insurance. With a 5 year Hybrid Arm, the same mortgage would cost $800 a month. With the minimum payment, you would save about the same amount as you would with an Option-Arm mortgage.
For an Option-Arm mortgage, on the other hand, the minimum payment would go up after 1 to 3 months, making the minimum payment more than $800. With a Hybrid Arm, the minimum payment would stay at $800 for the whole 5 years. This means that the homeowner will have a more stable monthly payment and less chance of negative amortisation.
Hybrid Arms, which are also called Hybrid Option Arms and Fixed Option Arms, save most homeowners about 55% of their usual monthly payments. They are very useful ways to save money and get out of debt. Contact a mortgage professional right away to find out if you can get a Hybrid Arm.
