Hybrid mortgages – also known as 50/50 mortgage products – include an equal mix of fixed-rate and variable-rate components within your single mortgage. This means you get the best of both worlds – the security of fixed repayments with the flexibility of a variable rate.
Although there was a time in recent years when mortgage experts considered a variable rate mortgage as the obvious choice to save mortgage consumers money over the long term, with fixed rates remaining near historic lows, a 50/50 mortgage may be a great alternative for you.
In essence, since it’s extremely difficult to accurately predict rates over the long term, a 50/50 mortgage offers interest rate diversification, which can help reduce your level of risk.
If you opt for the Dominion Lending Centres 50/50 Balanced Mortgage, half of your mortgage is locked into a five-year fixed rate and half is at a five-year variable rate. You can lock in your variable-rate portion at any time without paying a penalty. As well, each portion of the 50/50 mortgage operates independently – like two separate mortgages – yet the product is registered as only one collateral charge.
The 50/50 mortgage product is well-suited to a variety of borrowers, including those who:
Would normally go fully variable but are afraid prime rate is at its bottom
Aren’t comfortable being locked into a fully fixed rate
Can’t decide between a fixed or variable mortgage
Some features of the 50/50 mortgage include:
20% annual lump-sum pre-payment privileges
20% annual payment increase ability
Portability (the option to transfer your existing loan amount to a new property without penalty)
As always, if you have questions about the 50/50 mortgage product and whether it’s right for you, or other mortgage-related questions, I’m here to help!