As mortgage rates rise and home prices zoom upward, some buyers are turning to interest-only loans.

An interest-only loan allows you to pay just the interest on the mortgage for a set period, often the first five, 10 or 15 years. You don't have to pay principal during that time.

When the interest-only phase is up, the monthly payments skyrocket as you begin paying principal. Most borrowers expect to sell the house or refinance before the interest-only period ends.

If you get an interest-only loan, you always have the option of making more than the minimum payment and having it applied toward principal. This feature appeals to people who make a good living but don't have a steady income from month to month: Small-business owners and people who work on commission are among those who might like them.

For some people, interest-only mortgages are a little like auto leasing. Both are handy ways to get something you otherwise couldn't afford -- a beach house or a fancy BMW. Other people might be wealthy and use interest-only home loans to free cash that otherwise would go toward principal.

You still build equity if the value of the house increases.

Countrywide offers interest-only periods of 10 or 15 years with fixed-rate and adjustable-rate loans. Wells Fargo limits its interest-only offerings to adjustable-rate mortgages. They have five-year interest-only periods.

If a borrower doesn't sell the home or refinance the loan before the interest-only period ends, the monthly minimum payment rises abruptly. Let's say someone borrows $200,000 at a fixed rate of 6.5 percent, paying only interest in the first five years. During those five years, the payments would be $1,083 a month plus taxes and insurance, with nothing contributed toward equity.

At the beginning of the sixth year, the monthly payment -- principal and interest -- would rise to $1,350 in order to pay off the loan over the next 25 years.

By comparison, someone borrowing the same amount at the same rate but paying principal the entire time would have monthly principal and interest totaling $1,264. After five years, almost $13,000 in equity would have accumulated.