For many, the dream of owning your own home is a benchmark of financial success. Property is intrinsically attached to wealth, and wealth is a huge measure of success in a superficial world. As we all know, owning property is a complicated and time-consuming endeavour. It won’t happen overnight, but proper planning and preparation can bring that dream within arm's reach.

An unavoidable aspect of homeownership for most people is a mortgage. Buying property and finding a suitable mortgage is far from a “one size fits all” kind of arrangement. There are numerous kinds of mortgages and house-buying options, all with their own charms, quirks, and uses. Here, we take a look at some of the more unconventional routes to home ownership.

But first, what exactly is a mortgage?

Anyone interested in purchasing a home, and even those who aren’t, are likely familiar with the concept of a mortgage. In effect, a mortgage is a secured loan from an approved creditor in order to pay for a home or property. These creditors generally include banks, credit providers, and other financially orientated institutions.

A mortgage is not like any other loan, and the fact that there’s a home at the centre of the transaction is key. It differs from regular loans in that the property acts as collateral on the mortgage. This means that technically, it’s the bank who owns the home, and the borrower has to buy it gradually from the lender. If the borrower defaults on the loan, then the lender is in full right to then sell the property in order to make the money back.

Mortgages are generally preferred to the most common alternative of renting, as they actively contribute to personal wealth; that said, they're also quite complex, and can adversely affect the mental health of some borrowers who feel overwhelmed by the seemingly gargantuan sum that they must pay back. This is a fantastic read for anybody who wants to find out more about the varieties and complexities of mortgages. 

Buy direct from the owner

If you have a deep-rooted distrust of banks, then buying direct from the owner is a great option. This process involves purchasing the property and making regular monthly repayments to the owner, rather than to the bank. Cutting a bank out of the equation might sound like bliss to some, but there are certain protocols that one must follow. Some notes to remember include:

• Verbal agreements between the vendor and buyer are legal, but you are not bound to them. Written and signed agreements are legally binding.
• The written agreement should cover contingencies, including whether the buyer is granted a cool-off period, whether there are remaining inspections before the final decision by the buyer, who's responsible for repairs, what happens if the buyer fails to make repayments, etc.
• As a buyer, you should be wary of making payments directly to the seller. Consider using an escrow company to do this.
• You should still involve lawyers in the process; both parties should have their own lawyers, and a lawyer should oversee the closing of the deal.
• Both parties should read, understand, and agree on the terms of the sale.

There are a few reasons and advantages for which buyers and sellers would want to pursue a transaction of this nature. For buyers, a barrier to home ownership could be their bad credit history. Buying direct from a seller is a way of sidestepping the traditional obstacle of lender approval. For a seller, interest rates are very low in the current market of economic downturn. If a buyer offers 4% interest on their repayments when common interest rates are sitting around 2%, this constitutes a huge difference.

There are also disadvantages. Some sellers believe that they are not going to have to pay any realtor fees. This is not necessarily always the case, as people are occasionally motivated by unsubstantiated psychological security. Further, even with lawyers involved, much of the onus of contracts and agreements falls back on the buyers and sellers, who will likely be novices in these fields. Adopting an ad hoc approach to the financial and legal negotiations can very easily descend into chaos. 

Reverse mortgages

A reverse mortgage is a way of making money off of your home that’s been partially or fully paid off, and is most commonly done by pensioners and retirees who feel that they can’t live solely off their savings. You must be over 62, and the property must be your primary residence. 

Living off your home equity is kind of like slowly selling your home back to the bank. Recent data has shown that as the costs of living rise, the rate of reverse mortgages in the elderly has seen a corresponding increase. 

Another reason for the upward trend of reverse mortgages is the financial calamity caused by Covid-19. Reverse mortgages were a godsend for many who were struggling to live off of their reduced or halted incomes. They provided a lifeline to those who had no alternative access to capital, and to an extent, padded the Covid-fuelled economic pressure felt by older people. 

In effect, reverse mortgages can provide a huge degree of security to those experiencing financial hardship. Despite recent media attention, they have been prevalent since before 2020. As many now-elderly people bought their homes when prices were at a lower ratio to income, many now live in homes that have appreciated far beyond their initial value. This makes tapping into your equity a manageable and convenient way to supplement your income.

Despite this, reverse mortgages can lead to disastrous consequences for the homeowners. The system is majorly tilted in favour of the banks, and one way in which they do this is through the associated fees. All borrowers are subject to an annual fee of 1.25% on the remaining mortgage balance. You will also have to pay an upfront insurance premium of between 0.5 to 2.5%, depending on your disbursement. 

It is worth noting that giving part—or sometimes all—of your home’s worth to the bank majorly impacts the level of support that you can provide to family and loved ones after your passing. A reverse mortgage has its benefits during times of uncertainty, but a very thorough assessment should be made before settling on a decision.

Can you buy property with cryptocurrency?

Cryptocurrency is a decentralised online currency, meaning that it's independent to traditional institutions like banks and government, and it’s a hot topic right now. Still being relatively young at 13 years old, we’re seeing the beginning of what looks to be an especially troubling adolescence.

The biggest cryptocurrency is currently Bitcoin, the original and leader of the pack, so to speak. While volatility is key to the value of many cryptocurrencies, few can ignore that the prices are typically swinging upwards, at sometimes astronomical rates of growth. Bitcoin’s price has surged to roughly eight times its value in the last year alone, with the market’s peak still a seemingly long way away. But can you use the currency to buy property?

If you’re looking for a mortgage, then most banks will not accept cryptocurrency as your deposit. As previously mentioned, cryptocurrency’s externalism to the banking system is one of its most attractive features. What you can do is to liquidate (sell) your assets for fiat (national currency), and proceed as per usual.

Alternatively, for anyone who holds enough Bitcoin, you can always liquidate your assets and buy a house for cash, thereby bypassing a mortgage altogether. This is a great way to take your assets from being digital only, and to turn it into something more tangible. While bitcoin and cryptocurrencies in general are quickly gaining popularity, some high-profile commentators are warning that the market may be in a bubble, meaning that liquidating your assets could be a good idea.

Mortgages in a foreign property market

Buying property abroad is a popular investment choice. There are many reasons that make this kind of investment so attractive, including:

• A domestic property market that's in a phase of maturity
• A foreign market in a state of growth
• Retirement plans
• A philanthropic desire to invest in emerging economies
• Acquisition of a holiday home

Regardless of the motivations, when it comes to buying foreign property, there's no single answer to the issue of foreign mortgages as they are subject to the local law of each country. Some countries popular with American borrowers include the following:

• Malaysia—Foreign ownership laws are notoriously lax in Malaysia. You’re able to own 100% of the property, and the biggest requirement is that the property be valued at over RM1 million (approximately USD$300,000).
• Mexico—America and Mexico are intrinsically and geographically linked. With such high volumes of American tourism south of the border, it’s no wonder that Americans are so heavily invested in its property market. Mexico is especially popular with retirees looking for a cheaper and more laidback lifestyle.
• Italy—Americans tend to romanticise Europe, and Italy remains a destination of great allure. Great food, friendly culture, and strong infrastructure all remain high on the list of priorities for Americans looking to greener pastures abroad, and thankfully, Italy has them all.

Those looking to invest in foreign property markets must do their due diligence before making any large purchases. Though transferring money abroad has never been easier, making mortgage repayments from your home country is entirely possible and largely stress-free.

In conclusion

There are multiple alternative mortgage options available. You can hold your debt with the previous owner of the property, supplement your income with a reverse mortgage, use digital currencies to boost your buying potential, or buy in foreign markets. Whichever mortgage option you choose, it’s essential that you do your research to assess which is best for you and your economic circumstances.