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Hybrid Mortgages

When shopping for a mortgage do you go with the fixed rate or the variable rate option? With a fixed rate, you do not have to watch the market closely because you know that your rate won’t change affecting your mortgage payments. With a variable rate you will experience the highs and lows of the market leading you to potentially save money.

What if there was a way for you to reap the benefits of a fixed rate and a variable rate? Luckily for borrowers, there is a way to get the best of both worlds: the hybrid mortgage.

What is a hybrid mortgage?

Often referred to as a laddered mortgage or 50/50 mortgage, a hybrid mortgage allows you to lock in your loan at a higher fixed rate while the other part of your loan is at a lower variable rate. Your mortgage will be split in two, leaving you with the option to create different amortization and payment schedules for both components of your loan.

Are there numerous benefits to getting this type of laddered mortgage?

The benefits involved in a hybrid mortgage are plentiful. For instance:

  • With two different rates, if the variable one increases, the fixed portion of your loan will help offset the costs. On the other hand, if your variable rate decreases you can reap those rewards. The fixed rate offers a continuous security while the variable rate gives you a chance to take advantage of lower interest rates when they occur.
  • Hybrid mortgages allow you to move your renewal dates, thus limiting the possibilities of an interest rate hike.
  • Although the funds you receive from the lender act as two separate mortgages, it is only registered as one collateral loan. Essentially, you are getting two mortgages rolled into one.
  • You have the ability to lock in the variable rate portion without paying a penalty.

Is a hybrid mortgage right for my financial situation?

For many people, the idea of having a fixed and variable rate mortgage combined is too much. They would prefer to stick with a more basic package that meets their financial needs. For others, a hybrid mortgage offers the perfect balance between a fixed and variable one.

Everyone’s borrowing needs are different which is why before you decide if a hybrid mortgage is right for you, it is beneficial to meet with a broker. When you sit down with a mortgage professional, they can advise you on whether you are an ideal candidate for a hybrid mortgage.


Canada’s mortgage website

Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).

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