Which feature is allowed for a non-qualified mortgage but not for a qualified mortgage?

A non-qualified mortgage can include features that increase borrower risk, such as an interest-only payment option. This feature allows borrowers to pay only the interest on the loan for a predetermined period, which can lead to larger payments later when the borrower must start paying down the principal. This flexibility, while appealing in some scenarios, can also result in payment shock and a higher likelihood of foreclosure if the borrower is unable to handle the increased payment amounts.

In contrast, qualified mortgages are designed to protect consumers from risky lending practices by adhering to specific regulations. These regulations prohibit features such as interest-only payments and negative amortization because they can significantly increase the total indebtedness of borrowers over time. By ensuring that borrowers can afford the payments they are taking on, qualified mortgages provide a level of consumer protection that is not required for non-qualified mortgages.

Understanding these characteristics is crucial for both lenders and borrowers as they navigate mortgage options.