Don't Fall for the Option-Payment Mortgage Trap

Chances are you've seen the TV ads encouraging you to refinance your home with an option-payment mortgage. These commercials emphasize the thousands of dollars you can "save" each year when you pay using the lowest options. Too good to be true? You bet it is.

What those ads don't mention (aside from the split-second flash at the bottom of the screen) is that when you make the smallest allowed mortgage payment, your loan balance actually increases. Here are three reasons to steer clear of option-payment mortgages.

1. Negative amortization is a ticking time bomb. ...