Hybrid mortgages – also known as 50/50 mortgage products – include an equal mix of fixed-rate and variable-rate components within your single mortgage. Therefore, this means you get the best of both world. The security of fixed repayments with the flexibility of a variable rate.
Although, there was a time in recent years when mortgage experts 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.
Therefore, making it extremely difficult to accurately predict rates over the long term. A 50/50 mortgage offers interest rate diversification, which can help reduce your level of risk.
If you opt for a 50/50 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.
The 50/50 mortgage product is well-suited to a variety of borrowers, including those who:
- Go fully variable but are afraid prime rate is at its bottom
- Aren’t comfortable being locked into a fully fixed rate
- Can’t decide between a fixed or variable mortgage
- Savvy first-time homebuyers
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.
With Loanerr, borrowers can chat with our Mortgage Professionals online to help with finding the right product.