Combination Rate Mortgages combine fixed interest rates and adjustable interest rates. Lenders often refer to these loans as hybrid loans. 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.
A Combination Rate Mortgage may suit you if you need stability today. This is a great type of loan if you want to gain control of your finances by knowing your monthly payments will be the same for the next few years. Also a Combination Rate Mortgage may suit you if you want to repair your credit and you hope to eventually get a home loan with a better interest rate, but must first show you can repay a mortgage.
During the first couple of years, the combination rate loans typically have lower interest rates than fixed rate loans. Monthly payments are lower and you may be approved to borrow higher amounts. If you have a lot of consumer debt, (credit card balances, medical bills, high interest rate automobile loans, and etc.) these loans are a good choice. The amount of debt you have can be higher than with other types of loans.
You can also use Combination Rate Mortgage to refinance a home and/or consolidate debt. Using the cash that may be available, you can pay off your bills. Then all your debt is in the form of a home loan. You make 1 payment each month instead of a dozen. And your total monthly payment is lowered.
An example of this type of 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.
