Interest-only mortgage?

A modest mortgage of $200,000 at a rate of 6 percent gives you an interest-only monthly payment of $1,000. The same mortgage paid off over 30 years, requires a payment of $1,200 a month.

If that's too much, go for a cheaper house. At some point, the principal will have to be paid on the interest-only deal, either monthly or all at once. That's when the chickens come home to roost.

The terms vary from lender to lender and mortgage to mortgage. If the interest-only deal lasts five years, there may be 30 years or less to repay the principal. If there are 30 years, the payment jumps 20 percent, from $1,000 to $1,200. If it's 25 years, the payment goes to $1,288.

For some of these mortgages, the rate rises when the interest-only period expires. That will increase monthly payments even more. While the figures may look OK, they can be real budget-busters, especially for larger amounts.

Even more dangerous are the mortgages with the option of paying less than the interest. Here, your mortgage principal will increase with every payment. The euphemism for this is "negative amortization." When the chickens come home, the payments can easily become unaffordable.

Moreover, the principal could easily exceed the value of the house. That's not going to get you gold stars on your credit report. And don't try to walk away from that debt. It will follow you even after a foreclosure.

But the financial aspects of this situation extend beyond the mortgage to the philosophy of buying a home in a neighborhood that is beyond your means.

Most of your neighbors will be able to afford things you can't: better furnishings, a more prestigious car, fancier and more frequent vacations, better clothes. I'm sure you can think of more.

While you may be able to withstand this subtle envy, it's likely your children will be placed in unhappy situations that will be hurtful. There could even be psychological as well as social scars.

Why can't I have a new dress for the prom? Why can't I have a new car when I get my driver's license? Why do I have to work after school? I haven't enough time to do all the homework.

Beyond all this is the scenario where you're forced to "move down." My mother had to do this, and I can tell you that it had serious consequences for my older brothers and sisters.

The act of being forced to move upsets school routines, social activities and self-esteem. Moving alone is a traumatic experience for many adults as well.

Are there situations where an interest-only mortgage would be wise? Rarely. It might be suitable for the medical resident who has a solid shot at much larger income in a few years.

For the rest of us, it could lead to disaster, especially if real estate prices take a dive.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.