16 Aug Hybrid Mortgages – the 50-50 product
You are planning to buy your first home. You are also an individual who understands rates and likes to keep an eye on the rates and economic market. You may even be a risk-taker who still enjoys some security associated with a fixed product. In this case, you may be the ideal candidate for a Hybrid mortgage, also referred to as a 50-50 mortgage.
Why is this hybrid mortgage different? A hybrid mortgage (or 50-50) is a combination of features from the fixed rate mortgage with the variable rate mortgage (see our blog post on this). In other words, you have an equal balance of fixed-rate and variable-rate factors within your single five-year mortgage. This way, you only have a mortgage. You also have protection agains rising interest rates, while enjoying the flexibility and lower payments of a variable rate mortgage.
Not long ago, a variable-rate mortgage was considered the best choice to sae money. However, with the recent fixed rates at historic lows, a hybrid mortgage may be a great option to consider if you are planning to purchase your first home. With two different rates, if the variable one increases, the fixed part of your mortgage will help offset the costs. On the other hand, if your variable rate decreases, you will enjoy the rewards. One great advantage to add to the ones listed above is that you have the possibility of locking in the variable rate portion without paying a penalty. Don’t forget that a fixed rate will come with some penalties if the mortgage is repaid early, or if extra amounts of money are put towards the principal.
Similar to other types of mortgages, this one is not for everyone. Some people might find it to difficult to combine both a fixed and a variable mortgage into one, where others will be able to see the benefits a 50-50 approach can bring them. This is the reason why you should consult a broker to help you determine if a hybrid mortgage is the right one for you.