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Alternative Mortgage Options

By Hafsa Binte Omar

Homeowners who are looking for an alternative to the traditional mortgage loan have a few options available. These can provide a more flexible payment schedule, or provide you with access to funds for a purchase that may not qualify for standard financing. In this article, we will look at some of the different types of alternative mortgage options and answer some frequently asked questions about them.

Table Of Content:
  • Source: Google.
  • What is an Adjustable Rate Mortgage (ARM)?

    An adjustable rate mortgage (ARM) is a type of loan where the interest rate charged on the outstanding balance varies throughout the term of the loan. This means that your monthly payments can change based on what the current interest rate is at any given time. ARMs typically start with lower interest rates than non-ARM loans but can increase over time, so it’s important to take this into consideration when making decisions about your financing.

    What is a Balloon Mortgage?

    A balloon mortgage is another type of alternative mortgage option that allows homeowners to access lower monthly payments for part of their loan term by paying off their entire balance at one point before maturity. The most common type of balloon mortgage has five years of fixed payments followed by a final “balloon” payment that pays off the remaining balance in one lump sum when it comes due. While these can be beneficial in terms of reducing monthly payments, they can also present financial risks if you plan to stay in your home past the five year mark and aren’t able to pay off your entire amount owed at once.

    What is an Interest Only Mortgage?

    An interest only mortgage is another type of alternative mortgage option that enables you to pay only the interest on your loan each month during its initial stages, rather than paying both principal and interest as you would with a traditional amortized loan. This allows borrowers who are confident they will be able to make larger payments down the road to ease their financial burden in early stages while still keeping up with their debt obligations and building equity in their property.

    Alternative mortgages can be very useful options when considering how you should finance your next home purchase or refinance your existing loan. It is important to do extensive research and understand all applicable product features and associated risks before signing any agreements or committing yourself financially long-term. By being informed about these various types of mortgages, you'll be better equipped to make educated decisions about which ones may work best for you and your financial situation.


    Hafsa Binte Omar

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