Sometimes when you look at your mortgage you wonder if you’ll ever pay it off, or even make a noticeable dent in it. This is especially true in the first few years when almost all your monthly payments go towards paying interest.

For that reason, more people are considering mortgages that require the borrower to pay only the monthly interest portion of the loan. For some it is a great idea. For others it can be a trap. If it is something you might want to consider, make sure you know the situation you are getting into. Before looking at those aspects, look at how interest-only mortgages work and why they are becoming popular as interest rates rise and people look for alternatives to the standard, 30-year mortgage, the most common and most expensive mortgage.

Interest-only mortgages adjust to the prime rate, so whenever the prime rate moves, the loan’s interest rate moves with it. Depending on the loan amount and the type of loan you have, you could pay a rate that is anywhere from 0.25 of a point (a point equals 1 percent of the loan) to 1.091 percent below the prime rate if you pay points to “buy” a lower rate.

Borrower’s with an interest-only loan can make a principal reduction payment whenever they want. Typically, this type of borrower has a higher income than other borrowers but it is important to remember that incomes can also fluctuate. If a borrower has a good year, they can pay down the principal. If not, they don’t have to. They can use the home as a financial tool. Of course, there is nothing stopping any borrower from paying off any mortgage more quickly, assuming there are no prepayment penalties.

The value of most homes will likely increase regardless of how much the borrower owes on it. The equity will not, however, go up as much as it would if the borrower were also making payments to reduce the principal.