If the Fed Lowers rates again ....

[fsstnotch]

I'm curious what you guys think about Hybrid loans? I have a VA Hybrid. the terms are 4.5% fixed for 3 years. After 3 years it can go up or down a max of 1% with a 9% cap. I am currently starting my 3rd year fixed. This loan is currently on my rental property which I will never have a problem renting.

I think alot of the problem with the foreclosures is people living outside their means... as well as people financing into something they don't understand.

[cobra de capell]

fsstnotch - I agree with 4RE KLR's post above.

Hybrid's can be useful, depending on how long you plan to be in or maintain the property - it looks like you have a great rental property, but it may not cash flow positive if the rate goes to the 9% max. This could be a good time to negotiate a fixed rate 15-30 years as lenders are hungry for good loans to good people.

Hybrid's, of course, are the problem right now - your hybrid is a good example, just shorten the fixed period to 3 mos to 1 year and up the rate max, if any, to 13% and you have a clear example of the sub-prime problem. Your hybrid possibly adjusts every year, but sub-prime hybrids can adjust every few months or to the max - immediately!

It appears that a combination of things has turned the house buying experience into something similar to the car buying experience - it's my understanding that when buying retail, sales people primarily ask you how much you can afford to pay per month, avoiding the price of the bright shiny car - as least with cars the payment doesn't go up, it just least for 6-7 years.

The devil is in the details and fine print.