When in the market for refinancing your home mortgage, be wary of non-traditional mortgages. They can carry significant risk, and you should proceed only if you fully understand and accept the risk. Read on.

Nontraditional mortgages include "interest-only" mortgage loans where you pay no principal for the first few years of the loan and "payment option" adjustable rate mortgages where you will have flexible payment options, including the possibility of negative amortization.

Here's an example of where you can get hurt. If you accept a negative amortization mortgage, you'll make a reduced payment every month. But if the amount of the payment is so low that fails to pay the interest on the loan, then the shortfall is added onto the back of the loan. So what you end up with is a home loan whose principal continues to increase rather than decrease. You'll never pay off the mortgage; it will continue to grow. If then you have to sell the house, you'll be hit to repay the now higher loan. This could be especially dangerous in a market where housing prices have fallen from the price you paid.

If you have decided to refinance your mortgage, remember to compare different web sites to find the best terms and conditions for you. And don't forget to shop locally. Your home town bank may have better rates than you can find on the Internet. And be careful of the non-traditional mortgage products.