There are two types of mortgages in this world: fixed and adjustable. A fixed rate is just that; it's fixed and will never change. Fixed rates for investment properties are the best choice as cash flow is more easily managed when payments are set throughout the term of the loan. Adjustable rate mortgages can have lower start rates compared to a fixed rate loan and are also a good bet when interest rates in general are at relative highs.
In between a fixed and an adjustable rate mortgage is the hybrid; a form of an adjustable ate that is fixed for a predetermined period. Such loans are ideal when the property will be kept for a few short years.
A hybrid is known as a 3/1 or a 5/1 hybrid. The "3" and the "5" indicate the length of the fixed term before the loan changes in to an adjustable rate loan. Because adjustable rates can adjust, they're less easy to plan for. No one knows what rates will be in the future.
For example, if you're buying a property and know that you'll sell the property within five years, select the 5/1 hybrid which will give you a lower rate compared to a fixed. For instance, on a $300,000 loan, a fixed rate today might be 3.75 percent for a 30 year mortgage. This results in a $1,389 monthly payment. At the same time, you might find a 5/1 hybrid offering a rate of 3.00 percent for a monthly payment of $1,264.
If you held onto the property for 60 months, or five years, you would have saved $7,500. ฝากขายบ้าน Hybrid popularity will come and go based upon the mood of the markets but if your real estate planning requires buying and holding for a short period of time, the hybrid loan needs some investigation.
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