Matching a borrower with the right VA Loan option can be a dizzying process. Every case is different, and it can be difficult to predict a person’s financial future. This uncertainty motivates many active duty and retired veterans to learn about the benefits of VA Hybrid Adjustable Rate Mortgages (ARMs).

What is a VA Hybrid ARM?

A VA Hybrid ARM incorporates the characteristics of fixed rate and adjustable rate loans. Initially, the interest rate is fixed, but after a period of three, five, seven or 10 years, the rate is adjusted based on the 1-Year Constant Maturity Index. The interest rates for VA Hybrid ARMs fluctuate only 1 percent each year.

Are there different types of VA Hybrid ARMs?

Yes. There are two types of VA Hybrid ARMs: the 3/1 and the 5/1. Both allow a 1 percent annual interest rate adjustment after the fixed interest-rate period. Also, both options cap the interest rate at 5 percent during the life of the loan. Interest rate adjustments occur annually, except for the initial adjustment. In a 3/1 ARM, the first adjustment may occur 36 months after the first payment. In a 5/1 ARM, the initial adjustment may occur after 60 months.

What are the benefits of VA Hybrid ARMs?

During the initial period of a VA Hybrid ARM, the interest rate is generally lower than those of fixed rate mortgages. A shorter fixed-rate period means a lower starting interest rate. However, borrowers who predict a spike in interest rates should apply for a longer fixed-rate term.

Compared to most conventional loans, VA Loans have excellent refinancing options. With a VA Hybrid ARM, eligible borrowers will have the option of refinancing after the fixed-rate term. This can help them avoid the higher interest rates of adjustable mortgages.

Generally, the cost of a VA Hybrid ARM is less than a VA Fixed Rate Mortgage over the life of the loan.

Contact one of our loan consultants to learn more about this program.

Have questions or need help?

Call us now at 800-535-0270

Request a call back or email us your questions!

Get Started

No obligation quote