One of the key benefits of hybrid ARMs is that they offer the stability of a fixed-rate mortgage during the initial fixed-rate period, which can be especially helpful for borrowers who are planning to stay in their home for a relatively short period of time. After the initial fixed-rate period, the interest rate on a hybrid ARM will typically adjust based on changes in a specified index, such as the 1-year Treasury or the London Interbank Offered Rate (LIBOR), plus a margin set by the lender.
Another key benefit of hybrid ARMs is that they may offer lower initial interest rates than fixed-rate mortgages. This can be especially helpful for borrowers who are looking to lower their monthly mortgage payment or qualify for a larger loan. However, it is important to note that the interest rate on a hybrid ARM will typically adjust after the initial fixed-rate period, which may result in higher monthly mortgage payments in the future.
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