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. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Fixed-Rate Mortgage

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

    The rate of interest charged on a mortgage. Mortgage rates are ...
  4. Second Mortgage

    A type of subordinate mortgage made while an original mortgage ...
  5. Growing-Equity Mortgage

    A fixed rate mortgage on which the monthly payments increase ...
  6. CMG Plan

    A mortgage plan in which a borrower's mortgage is structured ...
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

    Shopping for a Mortgage in 2017? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2017 can all be done online.
  3. Personal Finance

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  4. Personal Finance

    Make A Risk-Based Mortgage Decision

    Find out how to choose which mortgage style is right for you.
  5. Personal Finance

    Mortgages: Fixed-Rate Versus Adjustable-Rate

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

    5 Things You Shouldn't Tell Your Mortgage Broker

    Applying for a mortgage can be a strenuous process. Here are five things to avoid doing when meeting with your mortgage broker.
  7. Personal Finance

    Now's a Terrific Time to Buy (or Refinance) a Home

    If you are looking to make a purchase or do a refi, you will benefit from continuing low interest rates – that could dip even lower.
  8. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
RELATED FAQS
  1. 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 >>
  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 >>
Trading Center