Nontraditional Mortgages

Filed Under: ,
Dictionary Says

Definition of 'Nontraditional Mortgages'


A broad term describing mortgages that do not take the traditional form. A traditional mortgage would require a relatively high initial down payment of about 25% and 25-year payment schedule with an interest rate that is compounded on a monthly basis. Nontraditional mortgages include interest-only mortgages, payment option adjustable rate mortgages (ARMs) and subprime mortgages.

Investopedia Says

Investopedia explains 'Nontraditional Mortgages'


A subprime mortgage is extended to individuals who are of higher risk due to a history of bankruptcy, a higher debt to equity ratio, a history of non-payment of debt despite sufficient cash flow and/or a low credit score.

Interest-only mortgages are balloon loans in which the borrower must service the interest during the life of the loan and then make a balloon payment at maturity to pay off the principal.

ARMs are loans that have interest rates that will be reset in periodic intervals. These intervals can vary from months to years, and will cause payments to fluctuate more than a traditional mortgage.

comments powered by Disqus
Hot Definitions
  1. Legal Monopoly

    A company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated.
  2. Closed-End Fund

    A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.
  3. Payday Loan

    A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest. The borrower typically writes a post-dated personal check in the amount they wish to borrow plus a fee in exchange for cash.
  4. Securitization

    The process through which an issuer creates a financial instrument by combining other financial assets and then marketing different tiers of the repackaged instruments to investors.
  5. Economic Forecasting

    The process of attempting to predict the future condition of the economy. This involves the use of statistical models utilizing variables sometimes called indicators.
  6. Chicago Mercantile Exchange - CME

    The world's second-largest exchange for futures and options on futures and the largest in the U.S. Trading involves mostly futures on interest rates, currency, equities, stock indices and agricultural products.
Trading Center