Buying a home is probably one of the biggest, most important, and smartest financial decisions you will make in your life. A Combination Rate Mortgage loan combines fixed interest rates and adjustable interest rates. Lenders often refer to these loans as a "hybrid loan." For the first 2 or 3 years, the interest rate is fixed. It remains the same and so does your monthly payment. During the remaining years of the loan, your interest rate becomes adjustable and can vary.
During the first 2 or 3 years, Combination Rate Mortgage loans typically have lower interest rates than fixed rate loans. Monthly payments are usually lower and you may also be approved to borrow higher amounts. If you have a lot of consumer debt, whether it is credit card balances, medical bills, high-rate automobile loans, these loans are a good choice for you. With a Combination Rate Loan the amount of debt you have can be higher than on other types of home mortgage loans.
You can also use Combination Rate Mortgage loans to refinance a home and/or consolidate debt. By using the cash that may be available, you can pay off your bills or high interest credit cards. Then, all your debt is in the form of a home loan. You make one easy payment each month instead of a dozen and your total monthly payment is lowered. By lowering your interest you can save thousands of dollars in finance charges over the life of your loan.
An example of Combination Rate Mortgage loan is a 30/3/1. A 30/3/1 Adjustable Rate Mortgage is a 30 year loan with the interest rate and payment fixed for the initial period of 3 years. At the end of 3 years, the interest rate and payment changes once each year for the remaining period of the loan.
For more information on the types of home mortgage loans and which loan is best for you, please be sure to visit our "Which Loan Is Right For Me?"
In short, remember each type of loan has different reasons why you should or shouldn't choose them. The best thing to do is do some research before applying and find the best interest rate and loan term because this will help keep your payments lower but it could actually save thousands of dollars in finance charges over the life of your loan.
