New 50/50 Mortgage - The Best of Both Worlds

New 50/50 Mortgage – The Best of Both Worlds

June 03, 2009 | Rates | admin | 0 Comment

One of my lenders has come out with a new product…..a 50/50 mortgage. 50% of the mortgage is variable and 50% is fixed. Although this is not a new concept in the mortgage industry, the fact that the variable portion is prime plus .40 (currently 2.9%) is one of the lowest variable rates around at the moment. Combined with a fixed rate of 4.09% your effective rate is only 3.38%!

For those of you who are sitting on the fence about whether to choose a variable or a fixed rate, this could be the perfect solution for you. You get the security of the fixed rate and you still get to take advantage of variable rates while they remain low for the next year or so.

So who is is this mortgage ideally suited for?

Customers who are unsure whether to go Variable or Fixed. This product eliminates the biggest dilemma facing mortgage borrowers in today’s economy.

Customers who want a low interest rate and are more risk-averse than a typical variable rate client. The weighted average interest rate on this mortgage is approximately 3.38% given today’s current pricing! And only 50% of the mortgage is subject to interest rate risk.

Customers who want added flexibility in paying down their mortgage. The two portions operate independently of each other, so they can choose to make prepayments on the fixed portion which has the higher interest rate or they can choose to pay down the ARM portion aggressively which in turn further minimizes their future interest rate risk!

Additional Features:

Only one mortgage charge is registered (conventional charge, not collateral). This means the mortgage can be ported to a new property easily without penalty

Each portion operates independently of each other in terms of payment frequencies, prepayment privileges, and prepayment penalties.

Each portion has the usual 20/20 prepayment privileges.

If you are looking to purchase your first home or refinance your current property this could be a great solution for you. If you have any questions feel free to give me a call.

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