Test Driving A Hybrid Mortgage
While most home buyers choose variable or fixed- rate mortgages, more are turning to a vehicle called "hybrid mortgages", according to a study by Ipsos Reis. A hybrid mortgage is when a mortgage holder splits the mortgage between a fixed-rate and a much lower variable rate. For example, a $200,000 mortgage may have $100,000 in a lower variable rate and $100,000 on a long term fixed rate mortgage. The thinking is that the homeowner receives some advantages of a lower, floating rate, with the security of having part of the mortgage in a stable, fixed rate loan. The poll found that 40% of prospective homebuyers (those who plan to buy in the next 2 years) intend to take out a hybrid mortgage. That compares to 32% in last year's survey. Currently, less than 10% of Canadian home buyers actually have a hybrid mortgage However, Ipsos Reid's Sean Simpson, says, "Looking forward to the next 2 years, there is much more uncertainty in the direction of interest rates." He says that hybrids are, therefore, becoming more attractive since they let people capitalize on low rates while retaining an element of security. Lenders expect more people to go with hybrids as awareness of the option becomes more widespread.