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Less common mortgage options

Sometimes the more common fixed or adjustable rate mortgages aren't advantageous or aren't available because of your circumstances. Here are some less common mortgage alternatives and their characteristics.

Graduated Payment Mortgages Growing Equity Mortgages
  • Fixed interest rate
  • Medium risk
  • Low monthly payments increase over 5-10 years, then level off for remainder of term (usually 30 years)
  • Initial low payments can result in negative amortization during early years of the loan
  • Formalized prepayment method
  • Medium risk
  • Payments rise over 5-10 years, then level off for remainder of term
  • Excess payment applied to principal
  • Fixed interest rate usually lower than conventional fixed rate mortgages
Balloon Mortgages Shared Appreciation Mortgages
  • High risk
  • Low interest
  • Short term (3-10 years)
  • Large final payment
  • Low interest rate in return for agreement to share appreciation of home value with lender upon sale or at a specified time
  • Low monthly payments
  • Medium to high risk; if value of home doesn't increase as expected, lender may charge additional interest
Seller-Financed Mortgages
Seller-Financed Mortgages* Wraparound Mortgages
  • Medium risk
  • Seller acts as lender
  • Terms are negotiated between you and the seller
  • Medium risk
  • Seller acts as lender
  • Terms are negotiated between you and the seller
  • Your mortgage payment repays both seller's original mortgage and any additional amount seller financed for you
  • Interest rate higher than on seller's mortgage but often lower than conventional fixed rate mortgages

*Note: FHA Seller-Finance Programs are eliminated as of October 1, 2008.