If you're a first-time home buyer or are looking to lower you mortgage payment substantially, there are now respective options to take from. However, you need to understand that these gimmicky loans could cost you a batch more later.

The first of these gimmicky loans is an adjustable rate mortgage (ARM) with negative amortization. Negative amortisation is a fancy manner of saying that your monthly mortgage payments aren't adequate to cover the monthly interest owed. You get a significantly lower monthly payment but the interest you don't pay is tacked on to the rule owed.

If your home goes on to increase in value, you'll be all right because even though the rule owed is increasing each year, so is your equity. On the other hand, if the value of you home remains the same or decreases, you can stop up owing more than than your home is deserving – making you “upside down.”

Rising payments

The second problem with an arm with negative amortisation is that even if the mortgage rates don't change, your monthly payments will most likely rise as your lender sets rates to recapture the lost interest. So, what you're paying today may be very different from what you're paying five or 10 old age from now.

The second type of gimmicky loan is the interest-only mortgage. While it also offers a lower monthly payment, it shares the same down side as the arm with negative amortisation – that the value of your home may not increase fast adequate to maintain up with the rule owed.

The refinancing problem

The concluding problem with these gimmicky loans is that they may be hard to refinance during their first three old age because there may be stiff fees or pre-payment penalties involved.

These gimmicky loans can look very attractive. But unless you have got good ground to believe that home terms in your country are going to appreciate greatly or you are thinking of merchandising in less than three years, these loans may not be as good a value as you think.