The VA Hybrid Loan Explained
The VA hybrid loan is perhaps one of the most attractive loans on the market for qualifying veterans. As part the of the the Home Loan Guaranty program VA Hybrid Loans are for active military service members and qualifying veterans. Call us now at (855) 956-4040 to learn more.
The hybrid loan is often misunderstood by many veterans. People hear the word ARM loan and become fearful and usually associate it with a negative cogitation. The number one fear is that interest rates will rise and monthly payments will increase drastically. This is a very understandable fear however interest rates also go down and with the VA hybrid loan there are safety nets set in place to make it a much safer loan option than your traditional ARM loan.
VA Hybrid ARM Loan Options
The hybrid loan has a few options. The VA hybrid mortgage includes a 3, 5, or even a 7 year fixed rate option. After the fixed rate period the rate of the loan cannot go up more than 1 percent per year it can also go down. VA Hybrid Loans are tied to the U. S. Treasury Index and have a margin of 2.00 percent or 2.25 percent. The adjustment cap over the life of the loan is 5 percent over the initial rate of the note. The yearly rate adjustment cap results in; more monthly savings, faster mortgage payoff, and faster break even periods. VA Hybrid Loans have much lower interest rates than conventional 30 year fixed mortgage rates with no additional fees or finance charges.
The 5/1 Hybrid loan option has a fixed rate for five years. The 3/1 Hybrid loan has a fixed rate of 3 years. Deciding if you should get an adjustable rate mortgage or a fixed rate VA Loan takes a lot of planning and consideration. Here a few questions to ask yourself when considering a hybrid loan. how long you plan to keep your home, the stability of your job, if you are buying a home, taking out a second mortgage, or refinancing your home. Also a person needs to consider what they think the future mortgage interest rates will do.
Is a VA hybrid loan a better option?
Is the VA hybrid arm loan a better option than a standard VA 30 year fixed mortgage? Ever situation is different but that being said with a little planning the VA hybrid ARM is definitely an option you should consider. The reason why is because you will apply more money down on your principle. If you do the math after 5 years you could be saving a substantial amount of money with the lower interest rate and lower monthly mortgage payments. As with any arm loan there are pros and cons and it is important to due your due diligence.
If you have questions about this loan program and would like to talk to a VA hybrid loan expert give us a call now at (855) 956-4040