When daredevils are about to perform a hair-raising stunt, they often will admonish viewers: "Don't try this at home." Maybe a similar warning should accompany one of the newer twists in mortgage financing: option adjustable-rate mortgages or option ARMs. Unless you are extremely well-versed about these complex loans, you risk ending up with a nasty surprise down the road that could cost you your home.

An option ARM is a type of adjustable-rate mortgage with as many as four different monthly payment options and, depending on its underlying index, an interest rate that could change every month. In most cases, each month the homeowner gets to choose one of four ways the mortgage check can be treated: a conventional 30-year-loan; a conventional 15-year loan; an interest-only loan, or a minimum-payment loan where the payment might not cover the interest.

The goal of the option ARM is "to get the payment as low as possible," explains George Yacik, a vice president at SMR Research, a New Jersey firm that studies the home mortgage market and home equity lending. The option ARM is a direct result of skyrocketing house prices across the nation. Since many first-time buyers need help getting their first home, more of them are turning to option ARMs that can offer starting interest rates as low as 1 percent for the first month.

Educating borrowers is a big challenge when it comes to option ARMs, largely because these is no "Gold Standard" for comparing these types of loans, whose features and construction can change greatly from lender to lender. "There is no standard option ARM product," Yacik points out. "They vary from one lender to another. Some even allow a borrower to skip a payment or two."

If you are a sophisticated borrower, you might find option ARMs beneficial if you manage to locate a lender whose particular option ARM has features that match your specific needs. But if you are a less-experienced homebuyer, you could slam into a wall of trouble if you don't understand how these loans work generally and how your lender's particular version works specifically. The upshot? You could end up owing your lender thousands of dollars more than you initially borrowed. You also could wind up facing bloated monthly payments you no longer can afford on a house in which you have built no equity, a potent mix that could pave the way to foreclosure.

Yet with today's climbing home prices, an option ARM might be the only mortgage for which many people can qualify. "Without them, a lot of people would be shut out of the housing market," Yacik adds. "As far as the lender is concerned, one loan is better than zero loans."

Aside from climbing interest rates, another major problem with option ARMs is "negative amortization," which occurs when the loan balance rises because you have not made a big enough payment to cover all of the interest you owe each month. That unpaid interest gets added to the principal-the amount you borrowed in the first place-and you wind up paying interest on both the unpaid principal and the unpaid interest. Since the interest rate can change every month with an option ARM, this can cause serious problems.

Those option ARMs that allow minimum or skipped payments also might include stipulations calling for a type of balloon payment. When this sort of balloon payment comes due, the borrower must repay all of the unpaid interest as well as any interest that has accrued on that interest. This can require a big lump-sum payment that, in this case, covers interest only and does not reduce the original principal.

Let's look at how different repayment schemes affect an option ARM loan for $100,000 with a starting interest rate of 4.75 percent amortized over 30 years. At the end of the first 30 days, you will owe $395.83 in interest. If you made the standard monthly payment, treating it like a conventional 30-year loan, you would send the lender a check for $521.65. That would pay that month's interest and reduce the total amount owed by $125.82, leaving you with a balance of $99,874.18. If you treat an option ARM like a 15-year loan and pay $777.83, your interest would still be $395.83, and the remaining $382 would reduce the principal to $99,618.

Both of the above examples whittle down the principal amount owed and also cover all the interest due. But if you choose to make an interest-only payment, such as $395.83, that means you still owe $100,000 to the lender and have not built any equity in your home. Given that the interest amount could change every month, you also run a very real risk of facing larger monthly payments if rates rise -- and most rate changes today are upward. Those bigger payments still would do nothing to reduce any of the loan's principal.

Now let's look at what happens when you opt to make a minimum payment of $200 a month. Since that payment is less than the interest owed, the excess unpaid interest of $195.83 gets added to the principal. In month two, you owe the interest on $100,195.83. At 4.75 percent, that is $396.61. If you make only the $200 minimum payment again, you get the unpaid interest-this time $196.61-added to your principal so you would then owe $100,392.44. As you can see, the longer you make minimum payments that do not cover the interest, the larger your loan debt grows. In most cases the minimum payment covers the interest at the beginning but stays the same even when the interest rate rises. That's when you get into trouble.

If you have one of those loans that lets you skip a payment from time to time, the entire unpaid interest gets added to the principal. There also might be a penalty payment involved. As noted earlier, if you do wind up in negative amortization, you will at some point have to come up with at least the interest money in one lump sum. After all, lenders make their money from the interest they collect every month. "The bet people are making -- lenders as well as borrowers -- is that higher home values and lower interest rates will bail people out down the road." Yacik explains. "It has happened in the last few years and they are betting that it will continue." Eventually, however, the lender has to be paid, "and we'll find out how many (borrowers) won't be able to do that in a couple of years."

Still, some people believe that the option ARM gives them their only real opportunity to afford a house in today's high-flying real estate market. For them, the trickiest question is: Once they get that house with an option ARM, will they have to pull off a hair-raising stunt be able to keep it?