• Leveraging an "exotic" mortgage can help you keep your earnings.home sweet home image by David Dorner from Fotolia.com
  
  The mortgage lending market is flooded with different lenders, programs and repayment strategies. Homeowners or new home buyers can get easily overwhelmed when entering the mortgage market unprepared. However, savvy consumers can use "creative" mortgage programs to maximize their savings while repaying a mortgage. It is important to note, however, that these mortgage programs are designed as short-term solutions.
  
  

Option Mortgages

• Option mortgages are home loans that offer flexible repayment terms. In most cases, the borrower is given four payment options: a 15-year amortization payment, a 30-year amortization payment, an interest-only payment, and a negative-amortization payment (minimum). It is important to note that the minimum payment will not even cover the interest due on the loan. This, in effect, will cause the principal balance to increase, not decrease. However, if a borrower only plans to hold a mortgage for a few years, a negative amortization mortgage will help the borrower keep some money in his pocket.
  
  

Adjustable Rate Mortgage (ARM loan)

• An ARM loan offers a borrower a low initial monthly payment. The interest rate on the loan usually will start as a fixed rate (often lower than the standard mortgage rate). However, after a set period of time, the interest rate can fluctuate. This period is normally between six months and five years. ARM loans are often calculated using a margin (a fixed rate) and an index (a fluctuating rate). Common indexes are the LIBOR (London InterBank Offered Rate) and the Prime Rate. Lenders calculate a new rate by adding the margin to the current value of the index rate.
  
  

Interest-Only Loans

• Interest-only loans are similar to ARM loans in that a low, initial monthly payment is offered. However, as opposed to ARM loans---where both interest and principal are paid---interest-only loans, during the initial period, do not cover principal. In effect, the borrower's mortgage balance will remain the same during the entire interest-only period. This period is normally between one and ten years. After this period expires, the borrower must either refinance or begin making standard principal and interest payments.