VA Hybrid Program
Why choose a VA Hybrid loan over a 30-year-fixed?
Hybrid programs provide an opportunity for veterans to receive the lowest rate available in the market, providing the most savings, and money in their pocket.
Ability to pay off other debts
While having a lower rate, during that period, you have the ability to pay down other obligations, to free up additional funds, to make life more manageable or to pay your house off quicker.
Opportunity to put more towards principal in the home
By taking a lower introductory rate, this frees up additional cash you originally wouldn’t’ve had, unless you took the hybrid program. These additional funds, if put back onto your mortgage, can create a compounding effect, significantly reducing the years you pay on your home.
Know exactly what to plan for in the future
Depending on the program selected, whether 3/1 or 5/1 hybrid, you know the rate is either fixed for the initial three years, at the 3/1, or fixed for five years, at the 5/1, allowing you to plan accordingly for the first adjustment. This adjustment, per year, can not increase or decrease more than 1%. That adjustment is then fixed for that full year.
Recoup period is a lot quicker
Veterans are provided with these lower introductory interest rates, which traditional home owners may have to pay additional fees to receive. This creates an additional benefit for veterans to receive VA hybrid loans at a lower cost, allowing for the additional savings to work in their benefit, that traditional homeowners would be required to pay more for.
Flexibility of the program
VA Hybrids eventually reach an adjustment period. The rate could decrease, increase, or stay the same, depending on the ten year treasury bill and index rates. VA Hybrid homeowners have taken advantage of a rate decrease in past years. This has caused some homeowners to remain with the hybrid program over the 30 year fixed, even after the adjustment period.
Fixed for the initial three years, this program allows veterans to take advantage of the lowest interest rate available. Most homeowners typically stay in their house for 3-5 years before they do something, whether it’s selling their home, or doing another rate reduction down the road.
The 3/1 Hybrid VA program is setup to help save money over the next 5 years. Many veterans like to use the savings to pay their mortgage off faster. Or, to take care of current bills so they can free up money in the future.
If you can use this program as mentioned for leverage to help you pay off your home or free up money in the future, then this would work well for you.
The 5/1 Hybrid, similar to the 3/1, is fixed for five years. Typically, the rate for the 5/1 hybrid is just slightly higher than the 3/1. Most homeowners tend to stay in this program for 7-8 years.