| eality of today’s market is that interest rates | | | | The primary difference between an Option-Arm |
| are higher than rates from the past few years. What | | | | mortgage and a Hybrid Arm mortgage is the length of |
| this means for first time homebuyers, real estate | | | | time the minimum payments and interest rates in a |
| investors, and property owners with adjustable rate | | | | Hybrid Arm are fixed. |
| mortgages is that monthly payments for the traditional | | | | Option-Arm mortgages typically have fixed interest |
| 30 year mortgage are becoming more and more of a | | | | rates of 1 to 3 months. In contrast, Hybrid Arms have |
| financial burden. | | | | fixed interest rates between 1 and 7 years. |
| Fortunately, for current and prospective homeowners | | | | What this means for homeowners is that the benefits |
| who have good payment histories over the last two | | | | of Option-Arm mortgages are now combined with the |
| years and credit scores above 620, an emerging | | | | security of longer termed mortgages. |
| product is making monthly payments for mortgages | | | | For example, a homeowner with a 200,000 5-year |
| both affordable and safe. | | | | adjustable mortgage pays $1467.00 before her taxes |
| Hybrid Arms | | | | and insurance. With a 5 year Hybrid Arm, the |
| Similar to Option-Arm mortgages, Hybrid Arm | | | | homeowner would pay $800 a month on the same |
| mortgages have 4 different options for monthly | | | | mortgage. The savings on the minimum payment |
| payments. These options are: | | | | would be comparable to the savings of an Option-Arm |
| 1.Minimum Payment - minimum payment—can | | | | mortgage. |
| lead to negative amortization. | | | | However, for an Option-Arm mortgage, the minimum |
| 2.Interest Only Payment - payment on only the interest | | | | payment would increase after 1 to 3 months, leading to |
| of the mortgage | | | | minimum payments above $800. With a Hybrid Arm, |
| 3.15 year Amortized Payment - payment towards the | | | | the minimum payment would remain at $800 for the 5 |
| principal and interest based on a 15 year term | | | | year term. For the homeowner, this means a more |
| 4.30 – 40 year Amortized Payment - payment | | | | predictable monthly payment and a reduced risk for |
| towards the principal and interest based on a 30 or 40 | | | | negative amortization. |
| year term | | | | |