Hybrid Mortgage Can Help Ride Out Cooling Market

By Karen Lawson
Local Lender Columnist
Jan 19, 2007
It's no secret that real estate markets are cooling off. Wondering whether to refinance now or later, when you have a better grasp on property values and interest rates? If you have an adjustable rate loan, refinancing to a fixed rate or hybrid mortgage will provide a lower fixed interest rate initially, but will eventually switch to an adjustable rate product.

Nobody Knows What the Future Holds

Analysts and real estate experts can only agree on one thing - the Orange County real estate market is changing. How long and how steep the decline in property values will is anyone's guess, so it's important to consider your needs first. Be mindful of exotic mortgage products that can erode your equity through negative amortization or deferred interest. A hybrid mortgage offers the stability of an initial fixed rate, but eventually adjusts with prevailing rates, converting from a fixed to an adjustable rate product.

Hybrid loans can stabilize your budget for a time, but remember to read all of the loan terms before climbing on board. Some of these loans contain conditions that prohibit or penalize refinancing for a specified period of time. Of course, consulting a financial advisor for a complete analysis of the features and benefits of a new mortgage is always recommended.

It is impossible to predict what the real estate market and interest rates will down the line, so assess and provide for your needs now by refinancing to a mortgage that best compliments your financial situation.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds a Master's degree in English from the University of Nevada, Reno.