Hybrid Mortgages Becoming More Popular
Choosing between a variable rate mortgage and fixed rate mortgage can become a complex issue for many homeowners. Do they lock in a predictable fixed rate that they are comfortable with, or go for more immediate savings and a fluctuating lower rate? A middle ground between the two may be the hybrid mortgage, which combines variable and fixed rate components to give borrowers the best of both worlds. More and more Canadians are finding the advantages of the hybrid mortgage, which is why this type of lending product is becoming all the rage.
Of the Canadians that are looking to purchase a home within the next twenty-four months, almost forty percent plan to look into the so-called hybrid mortgage, this according the a survey the RBC Royal Bank. This figure is up significantly from the same period last year. This type of mortgage is sometimes referred to as a combination mortgage.
Marcia Moffat, RBC Royal Bank head of home equity financing, cites that although interest rates are poised to go up, not everyone is planning to opt for a fixed rate mortgage with a longer term. In fact, Moffat went on to speculate, consumers are looking for mortgage diversification, such as the floating rate options that come with the hybrid mortgage. RBC is not alone in offering these new types of financing options; Scotiabank, HSBC, Laurentian Bank, and National Bank each offer a version of hybrid mortgages.
The biggest benefit of this kind of combined mortgage is that borrowers can take advantage of the lower interest rate often seen in variable rate mortgages while also enjoying the security that comes with a predictable fixed mortgage. The hybrid mortgage staves off some of the risk that is taken on with just a floating rate, and it lessens the complexities of trying to calculate the environment of the interest rate.
Regardless, fixed rate mortgages are still an overwhelming popular choice for would-be homebuyers and are preferred by around forty-four percent of Canadians who plan to buy a home within the next couple of years. The RBC Royal Bank survey noted that Ontarians were least likely to opt for the fixed rate mortgage (around forty-one percent) while Atlantic Canadians were the most likely (fifty-four percent).
