January 15, 2015
Hybrid mortgages – also known as 50/50 mortgage products – are a popular product in the mortgage broker arena. They include an equal mix of fixed rate and variable rate components within single mortgage rates. This means you get the best of both worlds – the security of a fixed rate with the flexibility of a variable rate.
Although there was a time in recent years when mortgage brokers considered a variable-rate mortgage as the obvious choice to save mortgage consumers money over the long term, with fixed rates remaining near historic lows, a 50/50 mortgage may be a great alternative for you.
In essence, since it’s extremely difficult to accurately predict rates over the long term, a 50/50 mortgage rate offers interest rate diversification, which can help reduce your level of risk.
If you opt for a 50/50 mortgage product, half of your mortgage is locked into a five-year fixed rate and half is at a five-year variable rate. You can lock in your variable-rate portion at any time without paying a penalty. As well, each portion of the 50/50 mortgage operates independently – like two separate mortgages – yet the product is registered as only one collateral charge.
Is A 50-50 Mortgage Right For Me?
The 50/50 mortgage product is well-suited to a variety of borrowers, including those who:
• Would normally go fully variable but are afraid prime rate is at its bottom
• Aren’t comfortable being locked into a fully fixed mortgage rate
• Can’t decide between a fixed or variable mortgage rate
• Savvy first-time home buyers
Some features of the 50/50 mortgage include:
• 20% annual lump-sum pre-payment privileges
• 20% annual payment increase ability
• Portability (the option to transfer your existing loan amount to a new property without penalty)
As the 50/50 option is a fairly new offering, according to a recent study by the Canadian Association of Accredited Mortgage Professionals (CAAMP), 7% of Canadian mortgage holders have 50/50 mortgages compared to 28% with variable-rate mortgages and 65% with fixed-rate mortgages.
How Do I Get A 50-50 Mortgage
The other thing to note is that it is not really offered by banks. Most major lenders prefer to offer one rate or the other. So you really need to speak to a mortgage professional to build a product like this. If you’d like any further information on this type of product then drop us an email at email@example.com