# hybrid mortgages



## moneypenny (May 3, 2011)

A broker offered a following hybrid mortgage. 
50% - Variable 5 year closed at (P-0.85)
50% - Fixed 3 year closed at (3.05)

Is there an advantage to taking such a deal compared to only fix in current market?

Darrel


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## kubatron (Jan 17, 2011)

It's not a bad option because your average rate is great.

It's only bad because after the 3 years on the fixed expires, what do you do then? Fix it for 2 years, since the other half is a 5-year term?

My mantra is go big or go home, pick one side. I'd pick the 3 year fixed at 3.05% anyday, 100% of the mortgage, over variable. Secondly, only 4% of clients take a hybrid mortgage, 66% take fixed and rest variable, thereabouts. Food for thought.


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## Four Pillars (Apr 5, 2009)

A hybrid mortgage is just a way to diversify your potential interest rates. I can see it being useful if your mortgage is large enough and you don't want to make the decision between fixed or floating.

I don't see why you would use 3 year for the fixed however - you should go five year for that.


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## moneypenny (May 3, 2011)

Well, there is bit more difference with the 5 year fixed. its around 4.44%.

I'm debating between going Variable for 5 year for P-0.85. Or going with hybrid then I have decide what to do after 3 years... either take the 2 year fixed. Is there even an option to go variable after that. I don't see a 2 year variable.. its either 1 year or 3 year. it seems like its going to complicate things after 3 year. 

What do you guys think?


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## kubatron (Jan 17, 2011)

well that's easy, at the 2 year mark you can fix it to a 2-year term, which is usually cheaper than 5 year

that 4.44 rate sucks because the 5 year rates are dropping pretty fast as per the govt of canada bond yield


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## moneypenny (May 3, 2011)

Hybrid with 60% Variable and 40% Fixed maybe an option I'm considering. 

Or even 70% V and 30 F. 

What are the 5 year fixed rates now?


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## kubatron (Jan 17, 2011)

Is your lender offering you a split or are you making it up that's what you'd like?

Rates going below 4% soon.


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## moneypenny (May 3, 2011)

I can pick whatever split I like. Just haven't decided on split. or even go with variable.

Whats your opinion on variable rate? Is that expected to rise soon?


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## andrewf (Mar 1, 2010)

I don't know why anyone would want to speculate in individual real estate holdings when they could buy a REIT, or group of REITs instead.


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## moneypenny (May 3, 2011)

Actually, its not an investment property. 

Would there be any concerns about having 5 year term for variable and 3 year term for fixed? It seems like I can't move to different lenders.


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## kubatron (Jan 17, 2011)

are you dealing with a broker or bank? have you asked them all these questions already? perhaps that's where you should be directing them. if you have and they aren't answering you, perhaps you're dealing w/ the wrong people. good luck w/ your decision.


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## moneypenny (May 3, 2011)

moneypenny said:


> Actually, its not an investment property.
> 
> Would there be any concerns about having 5 year term for variable and 3 year term for fixed? It seems like I can't move to different lenders.


Even though 3.05 fixed rate it good. Bank may not have reason give the best rates after the 3 years since I'm locked in for another 2 years. Overall it could end up costing more?


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## moneypenny (May 3, 2011)

kubatron said:


> are you dealing with a broker or bank? have you asked them all these questions already? perhaps that's where you should be directing them. if you have and they aren't answering you, perhaps you're dealing w/ the wrong people. good luck w/ your decision.


Yeah, I been talking to the bank.. wanted to get some opinions from "expert" folks here


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## Syph007 (May 2, 2011)

Well I'd take 100% variable. But depends on what you want to pay. Take a 5 yr chunk of historical data and analyze it. If you paid variable, you'd have paid overall less(but fluctuated), if you paid fixed you would have paid the most.... and hybrid somewhere in the middle. If you can get sub prime variable, take it all at 100%, at least that's what i recommend, and did myself.


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## moneypenny (May 3, 2011)

Syph007 said:


> Well I'd take 100% variable. But depends on what you want to pay. Take a 5 yr chunk of historical data and analyze it. If you paid variable, you'd have paid overall less(but fluctuated), if you paid fixed you would have paid the most.... and hybrid somewhere in the middle. If you can get sub prime variable, take it all at 100%, at least that's what i recommend, and did myself.


Thanks, I'm thinking of going with 70% variable just for some safety.


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