Alternative Mortgage Instrument

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. Growing-Equity Mortgage

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

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

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

    A type of mortgage where the interest rate paid on the outstanding ...
  6. CMG Plan

    A mortgage plan in which a borrower's mortgage is structured ...
Related Articles
  1. 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.
  2. 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.
  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. Investing

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. Investing

    Be Mortgage-Free Faster

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

    Mortgage Basics: Conclusion

    By Lisa SmithLet's recap what we've learned in this tutorial: At its most basic, a mortgage is a loan used to purchase a house. There are two primary types of mortgages: fixed rate and ...
  7. Personal Finance

    5 Reasons To Save For A Big Mortgage Down Payment

    You may be anxious to buy a home, but taking time to save a large down payment has numerous advantages.
  8. Markets

    Millennials Guide: How to Pick the Right Mortgage

    Here’s help in finding the perfect, affordable loan for that home you have been dreaming about.
  9. Personal Finance

    Behind the Scenes of Your Mortgage

    Four major players slice and dice your mortgage in the secondary market.
  10. Personal Finance

    The Benefits of Mortgage Repayment

    Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
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. 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 >>
  3. 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 >>
  4. 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 >>
  5. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
  6. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center