Are you the right fit for a hybrid mortgage?
According to Mortgage Professionals Canada, only 4% of mortgage holders select a hybrid "combination" mortgage. Is this product the right fit for you?
A hybrid mortgage lets you split your mortgage into 2 or more rates. The most common form of a hybrid mortgage is the 50/50 split, where half of your mortgage is in a fixed rate product and the other half into a variable rate product.
Some hybrid products allow you to customize your mortgage product even more, by putting some of the mortgage in a shorter fixed term, and the rest in a longer term. But what is the point in taking on a hybrid mortgage product?
The pros of this product is to help reduce the risk and exposure to potential unexpected interest rate movements. If you took on a hybrid mortgage with half of your mortgage placed in a variable rate term, and rates were to shoot up, you would feel less pain than if you had your entire mortgage placed into a variable rate product. You will also enjoy the perks of rates dropping, should you have a portion of that product with a variable rate.
A hybrid mortgage product can be ideal for:
- Homeowners who are torn between the fixed vs variable debate
- Someone who isn't comfortable putting their entire mortgage in a variable product and isn't willing to chance a huge spike in rates
- Someone who wants a lower mortgage penalty (penalties are higher on fixed rate/longer term mortgages)
- Has a spouse who has the opposite risk tolerance
This type of mortgage isn't fully understood by borrowers and isn't heavily promoted, which can explain why only 1 in 25 borrowers actually take on this product.
Speak to a Mortgage Broker today to learn more about hybrid mortgages and whether it is the right choice for you!