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Meaning / Definition of

Hybrid Mortgage

Categories: Finance,

Sometimes called an intermediate ARM, a fixed-period ARM, or a multiyear mortgage, a hybrid mortgage combines aspects of fixed-rate and adjustable-rate mortgages.The initial rate is fixed for a specific period - usually three, five, seven, or ten years - and then is adjusted to market rates. The adjustment may be a one-time change, or more typically, it changes regularly over the balance of the loan term, usually once a year. In many cases, the interest rate changes on a hybrid mortgage are capped, which can help protect you if market rates rise sharply.One advantage of the hybrid mortgage is that the interest rate for the fixed-rate portion is usually lower than with a 30-year fixed-rate mortgage. The lower rate also means it's easier to qualify for a mortgage, since the monthly payment will be lower. And if you move or refinance before the interest rate is adjusted - the typical mortgage lasts only seven years - you don't have to worry about rates going up.However, some hybrid mortgages carry prepayment penalties if you refinance or pay off the loan early. While prepayment penalties are illegal in many states, they are legal in others.

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Definition / Meaning of

CollegeSure CD

Categories: Finance,

CollegeSure CDs are certificates of deposit designed to let you prepay future college costs at today's rates, plus a premium based on the child's age and the amount you invest.The CDs, which are issued by the College savings bank of Princeton (NJ), pay annual interest rates linked to increases in an index of average college costs and are available with terms from one to twenty-two years.While these CDs are insured by the federal deposit insurance corporation (FDIC), the interest they pay is taxable, unless you own them within a coverdell education savings account (ESA), participating state 529 plan, or roth ira. With the roth ira option, the account must be open for at least five years and you must be at least 59 1/2 to qualify for tax-free withdrawals. CollegeSure CDs are sold in whole or partial units. At maturity, each whole unit is guaranteed to pay the average cost of one year of tuition, fees, and room and board at a four-year private college. If you decide to purchase only a partial unit, it will be worth only that portion of the average yearly college cost at maturity. If the intended beneficiary decides not to go to college, you can get the entire principal and interest calculated at the guaranteed rate back when the CD matures and use it for any purpose.However, if you choose to cash in the CD before its maturity date, you'll owe a penalty of 10% of the principal during the first three years of its term. The penalty drops to 5% for the remaining years of the CD's term, except for the last year, which carries a 1% penalty.

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