A friend who hosts a weekly real estate radio show had a grim warning for his listeners recently.

"Adjustable rates are rising," he said. "When you wake up tomorrow, refinance into a fixed-rate mortgage while those rates remain under 6 percent."

Although economists began predicting that rates would begin rising in the spring at the latest, we've been able to dodge the bullet for a while longer. The vacation, I'm afraid, is over.

While rates will never reach the highs of the early 1980s, when a 30-year fixed was available at 18 percent, there are certain "specialty" mortgages that the real estate industry is now warning against.

These included the interest-only mortgage, option payment ARMs, negative amortization mortgages and 40-year mortgages.

To help consumers sift through what is available, a new brochure, "Looking for the Best Mortgage," has been published as a joint effort by the National Association of Realtors and the Center for Responsible Lending, a nonprofit research and policy organization. The brochure is available to Realtors from the NAR for distribution to clients and on a PDF on the center's website.

Although these specialty mortgages by and large are designed to help many buyers who would otherwise be hard-pressed to purchase a house with a conventional product in a time of double-digit price increases, "Consumers are susceptible to loans with monthly payments that can spike dramatically, or that actually increase the amount they owe on their home," said NAR president Al Mansell.

Even in what purports to be a consumer-oriented society, and acknowledging that the Internet has increased the sources of information on all aspects of real estate and made that data easily accessible to anyone who can use a computer search engine, there are still a few people who don't understand how mortgages work and which product is right for them.

I know it's hard to believe. For example, on my friend's radio show, a caller told him that his son was obtaining a 9 percent mortgage to buy an investment property in a run-down area. When one considers that the son was putting 30 percent down on a house that was probably selling for no more than $130,000, 9 percent seemed a little out of line.

"Does you son have bad credit? the caller was asked. "No," he replied.

"You understand that no conventional mortgage or specialty mortgage has a rate so high," the caller was told. "Did you son shop for a mortgage?"

"Yes," the caller replied. "Obviously, all the shopping must have been done in the same store," my friend replied.

The caller could not figure out what the problem was. I hoped for their sake that the Brooklyn Bridge wasn't up for sale again.

The brochure differentiates between the conventional mortgages -- fixed rate and adjustables -- and the more exotic specialty products.

I recommend obtaining a copy, but here's a brief description:

The payment on interest-only mortgages only covers the interest on the loan for the first five to 10 years, and you pay nothing to reduce the principal. After the interest-only period, you start paying monthly payments covering both the interest and principal that must be repaid over the remaining term of the loan.

With a negative amortization loan, the monthly payment is less than the amount of interest owed on the loan. The unpaid interest is added the loan's principal amount, causing the amount to increase instead of getting smaller.

Option payment ARM mortgages allow different types of monthly payments, including a minimum payment that is less than the amount needed to cover the interest and increases the total amount of the loan; an interest only payment or payments calculated to pay off the loan in 30 or 15 years.

40-year mortgages mean that you pay off the loan in 40, not 30 years. You pay off the loan balance slowly and with more interest.

The brochure recommends that you consider the following when you shop for a specialty mortgage:

• How much can monthly payments increase and how soon can those increases happen?

• Do you expect your income to increase or do you expect to move before your payments rise?

• Will you be able to afford the mortgage when the payments increase?

• Are you paying down the loan balance each month or is it staying the same or even increasing?

• Will you have to pay a penalty if you refinance or if you sell the house?

• What is your goal in buying the house? Are you considering a riskier mortgage to buy a more expensive house than you can reasonably afford?

Published: September 1, 2005

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Al Heavens writes about real estate and home repair and improvement. He is the author of What No One Ever Tells You About Renovating Your Home: Real-Life Advice For Hassle-free, Cost-Effective Remodeling.