When is a Mortgage Risky?

Current market conditions have caused many analyst and lenders to warn against risky mortgages. But what products are risky, and can education regarding mortgages make all products safe?

Education seems to be the key when it comes to risky mortgages. Most lenders will tell you that if a borrower does their homework and has a program explained properly that any mortgage product is safe. Normally a risky mortgage is obtained to borrow more money for the bang, both for homeowners and investors. With so many options on the mortgage market today, only three large categories are consider being risky; interest only loans, 40 year term loans and Adjustable Rate Mortgage (ARM) loans.

Each product has it�s pro�s and con�s. Interest only loans are good for those who plan to have the home for less than five years, but can result in a large lump sum to by paid at the end. Forty-year terms reduce the monthly payment, but normally result in having to pay ten years of interest for a thirty-year loan. ARMs have monthly payments that are low and give the borrower the option of paying different amounts each month. The down side is that the least amount to pay each month leaves you in the same boat as an interest-only loan. In the end, only knowledge makes any of these loans safe for a consumer.