What is a Convertible Mortgage

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What is a Convertible Mortgage?

Similar to a hybrid mortgage, a convertible mortgage starts as an adjustable-rate or fixed-rate mortgage and turns into another a fixed-rate or an adjustable-rate loan if the borrower should decide to convert the mortgage.

Certain terms apply; for example, the borrower must keep one type of loan for a fixed period of time.

advantages: The obvious advantage is that this loan gives the borrower some control over their mortgage, rather than having to hopefully choose correctly the first time and/or refinance later (this is especially true for fixed-rate loans that might require pre-payment penalties).
disadvantages: There is usually a one-time conversion option, and that option almost always comes with fees. Also, the period of time to make the decision is sometimes shorter than expected.

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