more in one, two or three years (usually). Paying less now and more later is right for some buyers.

But this too has pitfalls. With an interest-only loan, you don’t pay down your principal at first. It’s cheaper, but your monthly payments are going to spike, often drastically, after the interest-only period is up. The same is true, if less dramatically so, with adjustable rate loans.

Be sure you can either afford to pay the adjusted monthly payment down the road, or that you’ll be able to refinance your mortgage again before the payment spikes. Both scenarios involve uncertainty. You need to be comfortable with the level of risk and not just look at your initial monthly payment.

80/20 Mortgages

You may also consider something called an “80/20” mortgage, actually two mortgages – one for 80 percent of the contract price, and a second mortgage for the remaining 20 percent. You’ll sometimes hear this referred to as a “piggyback” loan. Buyers often favor these because they can avoid paying a premium for private mortgage insurance (PMI) and don’t need to make a down payment.

As with other popular mortgages, you should consider the drawbacks, too. You’ll likely pay two sets of closing costs, though that may be less than a down payment plus PMI. And lenders are often very creative when it comes to 80/20 loans, especially the smaller, second one. It will likely have a much higher interest rate, and may reach maturity – that is, you may be responsible for paying the full balance – after only a short time.

Again, be sure you can either afford your future liability or will be able to refinance.

Eric Bramlett currently manages his Austin Real Estate Guide, his Austin Texas Real Estate company’s website, & his Austin Texas Realtor website.

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