There are many misconceptions and lack of knowledge surrounding the VA Hybrid Loan among veteran homeowners. The recent housing crash has created an atmosphere to completely shun any loan that is not a fixed rate. Even the mention of the word “adjustable” rate probably just made your skin crawl. In general, we don’t like the sound of the word “adjustable” because we automatically assume the interest rate on our home will eventually balloon to outrageous rates.
Notice the VA “Hybrid” loan does not mention the state itself as an “adjustable” rate. When we are talking about any home loans outside the traditional “fixed” loans, our thoughts start shifting towards “adjustable” and we automatically dismiss the loan as a viable option.
Because of the negative connotation surrounded by home loans not fixed, many veterans can miss out on a great opportunity to save a lot of money and pay off their home loan significantly faster.
Without getting into too much detail about the VA Hybrid Loan, let’s talk about the basics and give three reasons why the VA Hybrid loan can be a great option for veteran homeowners.
VA HYBRID INTEREST RATES ARE ALWAYS LOWER THEN FIXED RATES
This is the simplest reason to consider a VA Hybrid Loan. For example, if the fixed 30-year loan rates are 4% the VA Hybrid loan will typically be at 3% and many times lower. Many homeowners will refinance to get a full point lower on their interest rate, but do not even consider going to a VA Hybrid loan that is MORE than 1% lower. A 1% lower interest rate can equal thousands and thousands of dollars over the life of the loan.
Many homeowners looking to pay off their mortgage faster should consider getting a VA Hybrid loan and making larger payments to a lower monthly cost. It’s simple math. A lower interest rate can help you pay off your loan faster and save money.
VA HYBRID LOANS ARE FIXED FOR 5 YEARS
It’s well-known fact that military families are constantly on the move. I want you to think back on your career and figure out how many military stations you stayed at longer than 5 years? Probably not many. Since the VA Hybrid Loan is fixed for 5 years, homeowners get a much lower interest rate and by the time they move and sell their home they saved hundreds to thousands of dollars on unnecessary interest on their fixed 30 year loan.
Even if you happened to stay in your home for 10 years, the amount of interest you paid down in the first 5 years could greatly outweigh the rate adjusting.
VA HYBRID LOANS CAN ONLY MOVE UP 1 POINT PER YEAR
This is probably the most common misconception with the VA Hybrid Loan. In fact, you probably thought in your mind, “After 5 years I don’t want my interest rate balloon to an outrageous amount.” The simple answer is IT CAN’T.
Homeowners often forget to consider that VA Hybrid loan interest rates can also GO DOWN, but no more than 1 point per year. If VA interest rates decrease, there is a very good chance your VA Hybrid loan will go down.
Potential homeowners should not be afraid of the VA Hybrid loan and many veterans would save thousands of dollars by taking advantage of the VA Hybrid loan. As always, make sure to speak with a professional loan officer at LowVARates.com to discuss the best possible options for your unique circumstances and make sure to ask about the VA Hybrid loan.