Are you considering taking out a home loan? Why not look at a hybrid alternative?
These days, it’s increasingly beneficial to educate yourself on the various pitfalls involved in home financing and taking out a home loan. It is also wise to study the rise and fall of interest rates, so you know when to and when not to borrow. Yet, perhaps the most important question that potential borrowers must ask themselves is this: fixed-rate or variable-rate? It has always been very black and white when it comes to home loan interest rates; either you get a fixed rate that remains the same for the duration of the loan, or a variable rate that fluctuates depending on the markets. Thankfully, the recent industry development of hybrid home loans provides a significant grey area that will potentially allow borrowers the best of both worlds.
What is a Hybrid Home Loan?
Given the competitive nature of the home finance market, it is understandable that banks and lenders are constantly looking to innovate. Every situation is different, and the progress of time constantly throws up situations that were not there before. Financial institutions look to take advantage of this, coming up with different offers, packages and schemes that are specifically tailored to suit just about any need.
Hybrid home loans are the latest in this line of innovation, and combine the attributes of both fixed and floating type loans. This means that the borrower is offered a fixed rate initially, for the first 3-5 years of the loan’s duration. Then, once that period has passed, the rate changes to a variable or floating one. Such loans are designed to offer stability during the initial period of the loan, and are ideal for borrowers who expect to be able to manage instability better later on in their financial lives.