Hybrid ARM

AAA

DEFINITION of 'Hybrid ARM'

A hybrid adjustable-rate mortgage blends the characteristics of a fixed-rate mortgage and a regular adjustable-rate mortgage. This type of mortgage will have an initial fixed interest rate period followed by an adjustable rate period. After the fixed interest rate expires, the interest rate starts to adjust based on an index plus a margin. The date at which the mortgage changes from the fixed rate to the adjustable rate is referred to as the reset date.

Also known as "fixed period ARMs".

INVESTOPEDIA EXPLAINS 'Hybrid ARM'

A borrower should carefully consider his or her time horizon when choosing a hybrid arm and recognize the risks associated with the reset date, or the expiration of the fixed interest rate period. If there has been a large change in interest rates, this reset could create substantially large payments; however, typically the amount by which the interest rate can adjust is subject to an interest rate cap.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Payment Option ARM

    A monthly adjusting adjustable-rate mortgage (ARM) which allows ...
  3. Fixed-Period ARM

    An adjustable-rate mortgage (ARM) with an initial fixed-interest-rate ...
  4. Convertible ARM

    An Adjustable Rate Mortgage (ARM) that gives the borrower the ...
  5. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
  6. Cap

    The highest point to which an adjustable rate mortgage (ARM) ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Insurance

    ARMed And Dangerous

    In a climate of rising interest rates, having an adjustable-rate mortgage can be risky.
  3. Credit & Loans

    How Mortgage Refinancing Affects Your Net Worth

    Find out how to determine whether refinancing will put you ahead or even more behind.
  4. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  5. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  6. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  7. Options & Futures

    This ARM Has Teeth

    Find out how to avoid getting bitten when your mortgage rate resets.
  8. Credit & Loans

    Are APRs different in different countries?

    Learn about the term APR and how it is used in the United States and other countries. Explore why different lenders charge different APRs.
  9. Credit & Loans

    What loans do and don't have an APR?

    Learn about what annual percentage rates (APR) are and what they mean. Explore different fixed and variable APRs charge by different lenders.
  10. Credit & Loans

    What are the pros and cons of owning an equity REIT versus a mortgage REIT?

    Learn about investing in equity, mortgage and hybrid REITs. Explore the different strategies REITs employ to generate income and create dividends.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center