DEFINITION of 'Alternative Mortgage Instrument'

A broad category of mortgages that vary from fixed-rate, fully amortizing mortgages in terms of amortization schedules, interest rate structure and payment options. These mortgages often make it easier for individuals to purchase real estate by reducing monthly payment amounts and increasing the amount the borrowers are able to finance.


BREAKING DOWN 'Alternative Mortgage Instrument'

Adjustable-rate mortgages, adjustable-rate mortgages with initial fixed interest rates, mortgages with temporary buydowns and mortgages with negative amortization features all fall under the alternative mortgage instrument category. Alternative mortgage instruments are popular in high-cost areas. Because most alternative mortgage instruments are indexed to short-term interest rates, they also thrive during economic conditions under which short-term interest rates are meaningfully lower than long-term interest rates.

RELATED TERMS
  1. Fixed-Rate Mortgage

    A mortgage that has a fixed interest rate for the entire term ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Growing-Equity Mortgage

    A fixed rate mortgage on which the monthly payments increase ...
  4. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  5. Mortgage Rate

    The rate of interest charged on a mortgage. Mortgage rates are ...
  6. Dual Index Mortgage

    A type of mortgage where the interest rate paid on the outstanding ...
Related Articles
  1. Personal Finance

    Choose Your Monthly Mortgage Payments

    Exotic mortgages allow you to decide how much to pay. Find out how much they really cost.
  2. Personal Finance

    Mortgage Amortization Strategies

    Should you get a 30-year mortgage? A 15-year one? Ways to decide which mortgage is the best fit.
  3. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  4. Personal Finance

    Shopping for a mortgage in 2016? Use this tool first.

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2016 can all be done online.
  5. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Insights

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  7. Personal Finance

    Be Mortgage-Free Faster

    Getting rid of this debt faster has bigger benefits than you might think.
  8. Personal Finance

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
  9. Personal Finance

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
RELATED FAQS
  1. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  2. How should you choose the amortization period for your mortgage?

    Read about key considerations that homeowners should take into account before choosing the amortization period for their ... Read Answer >>
  3. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  4. What is an assumable mortgage?

    The purchase of a home is a very expensive undertaking and usually requires some form of financing to make the purchase possible. ... Read Answer >>
  5. If my mortgage lender goes bankrupt, do I still have to pay my mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Sorry to disappoint, but there ... Read Answer >>
Trading Center