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Subprime Hybrid Mortgages
By: Carrie Reeder iSnare Expert Author
Subprime hybrid mortgages offer temporarily low rates for borrowers while they
work to rebuild their credit. With a sub-prime hybrid mortgage, you don’t have
to pay PMI, saving hundreds a year. After two or three years of on time
payments, you can then refinance for conventional mortgage rates.
Hybrid Mortgage Basics
Since so many people refinance their home loans after they have reestablished
their credit, lenders created a mortgage to offer maximum flexibility for
borrowers. Hybrid mortgages are typically 1.5% lower than a conventional loan
for the first two or three years, depending on your mortgage terms. After that,
the rated becomes adjustable, rising and falling based on indexes.
Lenders usually require a prepayment fee if the mortgage is paid off before two
or three years. Since most borrowers use this period to establish good credit,
the fee isn’t a problem for most. You may also be able to waive the fee by
paying a point upon the loan’s settlement.
A hybrid mortgage also allows you to borrow more than with a fixed rate mortgage
since your monthly payments are lower. You may also decide to increase your down
payment to lower your rate or increase the amount you qualify to borrow.
Hybrid Mortgage Lenders
Hybrid mortgages are offered by conventional and sub-prime lenders. Rates, fees,
and terms will vary with each lender. In order to find the best financing
package, you should request quotes from several lenders before making a
decision.
Typically online financing companies waive or reduce fees, so they are well
worth checking out. You can also request quotes from traditional companies
through their websites. Online mortgage brokers also make comparison shopping
easy by offering several side by side quotes.
Refinancing Options
After you have had your hybrid for at least two years, you should begin shopping
to refinance your mortgage. If you are planning to move within seven years, an
adjustable rate mortgage may offer you the lowest rate. If you plan to stay put,
a fixed rate mortgage can guarantee you a low rate over the course of your loan.
As with a sub-prime loan, compare lenders and finance packages to find the best
deal.
About the Author:
See my recommended Subprime Mortgage Lenders online. Carrie Reeder is the owner
of ABC Loan Guide, which offers help with loans for people with bad credit. |