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VA Hybrid Loans

Veteran borrowers now have the option of a fixed-rate VA loan or an Adjustable Rate Mortgage know commonly as the VA hybrid loan.  If your plan to sell or refinance you VA home loan in the nest 10 years, the VA hybrid loan may help you save thousands of dollars in interest by offering lower starting VA interest rates.  VA adjustable rate mortgages have been around since the late 80's.  In 2008, VA passed a guideline allowing the extension of VA hybrid loans until 2012.  In 1999, approximately 2 percent of Veterans used an ARM or Hybrid Loan.  In 2005, approximately 27 percent of Veterans used some form of ARM loan.  In 2008, approximately 36% of all VA loans closed where VA hybrid loans.  While these numbers were compiled internally and can not be guaranteed as 100 percent accurate, it does illustrate a trend moving towards more progressive types of VA loans such as the VA hybrid loan program.   Assistance is available if you would like to see if the VA hybrid loan is right for you.  You may wish to ask about the 3/1 VA hybrid loan or the 5/1 VA hybrid loan.

VA hybrid loans have an initial fixed interest rate for three to five years.  The VA 3/1 hybrid stays fixed for three years and the VA 5/1 hybrid stay fixed for 5 years.  After the fixed rate  period, the VA hybrid adjusts annually.  Both 3/1 VA hybrid and 5/1 VA hybrid loans allow a 1% annual interest rate adjustment after the initial fixed period, and a 5% interest rate cap over the life of the loan.  Interest rate adjustments must occur on an annual basis, except for the first adjustment which may occur no sooner than 36 months from the date of the borrower's first mortgage payment on the VA hybrid 3/1 or 60 months from the date of the borrower's first payment on the VA hybrid 5/1 ARM.  Both loans have a 30 year loan term.

VA  Hybrid Loan Index and Margins

The index is the weekly moving average yield on U.S. Treasury Securities adjusted to a constant maturity of one year.  Also know as the one year constant maturity index.  VA hybrid loans have either a 2.00% margin or a 2.25% margin.

VA Hybrid Loan Adjustment Caps

The life cap is the percentage amount the loan can adjust over the life of the loan.  The VA hybrid loan has a life cap of 5%.  This means the interest rate will never be higher than 5% above the initial start rate.

The adjustment cap is the percentage amount the VA hybrid loan can adjust annually after the initial fixed rate period of three or five years.  The VA hybrid loan has an adjustment cap of 1% per year.

VA Hybrid Loan Adjustment Dates

Government loans only adjust four times per year on the first day of January, April, July and October.  The first adjustment on a VA hybrid loan will occur with the corresponding adjustment period that follows the initial fixed period.  For example, if the initial period ends in May, the rate will adjust in July and then annually there after until maturity.

3/1 VA hybrid loan:  the first rate adjustment will occur between the 36th and the 42nd payment due date.

5/1 VA hybrid loan:  the first rate adjustment will occur between the 60th and the 66th payment due date.

VA Finance Specialist are available to answer your VA mortgage loan questions from 08:00 to 20:00 eastern.

800-436-5904