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What is a hybrid 5/1 loan and should I do it. It will start at 3.6 and only go up 1% a year up to a

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March 22 2010 - Auburn
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A hybrid ARM will give you a great rate guaranteed for 5 years. Depending on the margin and what index its based off of, this loan can be a great loan to keep for years after. ARMs are great if you know you will only be keeping the house for a specific amount of time (5-7 years). Find out what the index is that will be used and look at the history of its movement.
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March 22 2010
There are dozens of types of Adjustable Rate Mortgages.  Who ever is offering this "hybrid 5/1 that starts at 3.6%" is required by law to fully disclose on a good faith estimate the rate, payments and terms.

A typical 5/1 ARM loan will have a fixed 5 year period and the remaining 25 years will be adjustable "once" per year.  There will be rate caps, max rate, and margins that you need to know.  These will tell you the limitations of the adjusting rate.  

General rule of thumb, if you do not plan on keeping the property or already know you will be refinancing within 5 years, then the 5/1 ARM is a relatively safe financing tool.  



 
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March 22 2010
 
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