What is a hybrid ARM?
A)An investment that is tied to mortgage rates which can be used to hedge the risk associated with an adjustable rate mortgage.
B)A mortgage that offers a fixed rate for a fixed period of years and then reverts to an adjustable rate.
C)A mortgage that offers an adjustable rate for a fixed period and then offers an adjustable rate for a period that is based on the principal outstanding.
D)All of the above are examples of hybrid ARMs.
E)None of the above.

Question

Quizplus · Accepted Answer

A hybrid ARM is a type of mortgage that offers a fixed rate for a fixed period of years (usually 5, 7, or 10) and then reverts to an adjustable rate. This can be a good option for borrowers who want the stability of a fixed rate for a period of time, but also want the potential for lower rates in the future if interest rates decrease. Option A is referring to a mortgage-backed security, not a mortgage product. Option C is not an accurate description of a hybrid ARM. Option D includes all options, but only option B accurately describes a hybrid ARM. Therefore, option B is the best choice. Option E is not correct as there is a correct answer.

What Is a Hybrid ARM