These are never a good idea. If you enter into such an agreement, you are allowing the lender to require full payment from you at their demand. Even if you are making the regularly scheduled payments, the lender can call in the loan at any time. This could result in you losing your home.

They may seem appealing when cash is short, but borrowers beware. The payments on this type of loan will be quite low because you are only making payments on the interest until the end of the repayment period. However, a large balloon payment will be required at the end of the loan. Many homeowners find that last large payment difficult to make.

Like credit card teaser rates, lenders may advertise home equity rates that only apply for a specific period of time. Many homeowners have been fooled into signing up for these loans and discover the deception only when their rates go up. It pays to ask your lender in advance how the interest rate will be calculated over the life of the loan.