The significant difference between hybrid and convertible loans is that for hybrids and two-steps, there is no choice about if or when the mortgage converts.

Along with being called hybrid or two-step, these mortgages are also known by a combination of numbers (for example, a "25/5 loan" or a "23/7 loan"). Usually adding up to 30 (the typical term length of most mortgages), the numbers represent how long the first rate (the smaller number) and the second rate (the second number) last.

For example, a 25/5 loan would have a fixed rate for the first five years, and then it converts to an adjustable rate for the remaining 25 years.

There are also hybrid loans that have a three-digit combination, for example, a "30/5/5 loan" or a "15/3/3 loan." In this situation, the first number is the length of the loan, the second number is the length of the fixed rate, and the third number is how often the adjustable rate changes.

For example, a 30/5/5 loan is a 30-year mortgage that has a fixed rate for the first five years. Afterwards, the rate changes every five years. For the 15/3/3 loan, it is a 15-year mortgage that has a fixed rate for the first three years, and then the rate will change every three years.

• advantages: This loan is attractive to borrowers that know they will live in the home for only a few years.

• disadvantages: The significant disadvantage comes with the staying in the house for more than 10 years, in which case, having a fixed-rate mortgage will likely cost less over the term. Furthermore, the rate increases can surface at inopportune times for the borrower [such as at the same time as a lay-off]. Payments can increase up to 60% from one month to the next.