With home prices surging, lenders are coming up with increasingly creative mortgages aimed at homeowners whose budgets are stretched thin.

Among the newly popular options are loans based on the value of the home after improvements are made. They're appealing because they can increase the value of your home -- and lifestyle -- but might require more cash or bigger monthly credit-card payments than you'd like.

Such mortgages and looser lending standards make homes more affordable. But they also contribute to the rise in prices by making it possible for more people to buy their first home -- or trade up. These loans "help create the inflation in values," says Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley.

While most home buyers still opt for traditional fixed-rate loans, lenders are planning to introduce an even wider array of niche mortgages as the refinancing boom wanes and competition intensifies.

Countrywide, for instance, is looking into a mortgage that would allow buyers of new homes to finance not only the purchase price but also utility bills. IndyMac Bancorp, meanwhile, is rolling out a mortgage aimed at self-employed borrowers who have most of their assets tied up in their own business and little cash.

But flexibility has a price. For example, if you take out a loan that lets you skip some mortgage payments, you'll pay more in interest overall. That's because the missed payments are placed on the back end of the loan.

With rising prices forcing many buyers to settle for homes that need work, lenders such as Wells Fargo and GMAC Mortgage, a unit of General Motors Corp., also are pushing "purchase-and-renovate" loans. These allow the borrower to finance the cost of the home plus remodeling expenses based on the home's value after improvements are made.

Because purchase-and-renovate loans are riskier than conventional ones, rates are typically 1/8 to 1/4 of a percentage point higher. In addition, borrowers often pay interest on the loan's total value even though they won't receive money earmarked for renovation until improvements are made. And the lender must approve the building plans.