Alternative Mortgage Financing

One of the most important by-products of the recent financial crisis was the disappearance of the non-prime alternative mortgage financing products. In the past when there were no high credit score, borrowers purchasing or refinancing property could qualify for alternative mortgage loans that compensated for the added risk with increased rates of interest. Lenders that made these loans demanded 1-3% higher rates of interest than those that were available on the prime loans. Higher loans of interest were considered sufficient for compensating for the additional lending risk. In the present day market, the non-prime mortgages are available for around 5% to 7%.

However, such mortgages were eliminated by stringent financial regulations and the departure of the private secondary mortgage market. In […]