The “5” in the term refers to the number of years with a fixed rate, and the “1” refers to how often the rate is adjusted after that (once a year). They are known as hybrids because they behave like fixed-rate mortgages during the introductory period. Fortunately, with a VA hybrid loan, there are mandatory limits that make these loans much more stable. For a variety of reasons, hybrid loans offer a fixed rate period of three, five, seven, or 10 years.
Because of this, the initial fees are likely to be lower than those of standard ARMs and may even be a little different from those of the other hybrid ARM options. This loan will allow you to take advantage of sudden drops in interest rates, giving the VA ARM 5-1 hybrid loan a fairly big advantage over a standard fixed-rate mortgage. ARMs are often referred to as hybrid loans because they behave like a fixed-rate loan during the introductory period and then like an ARM loan.