NEW YORK (CNN/Money) - What do you think about "interest only" mortgages? They sound inviting, but will they come back to bite us in the end?

-- Heidi Olguin, San Marcos, Calif.

First of all, "interest only" mortgage is a bit of a misnomer.

Yes, the idea is that initially you make only interest payments as opposed to both interest and principal payments as you do with a conventional loan. But you're only delaying principal payments, not eliminating them (eventually, the lender will want back its principal).

The "interest only" period varies. Sometimes it's five years, after which you begin repaying interest and principal over the next 25 years. In other cases, the principal payments may not kick in for a longer time, say, seven, 10 or 15 years.

Typically you have the right to make principal payments before then, but check for possible prepayment penalties.

There are plenty of other variations as well. The interest rate could be fixed for the life of the loan, or it might be adjustable.

(For more details on how these loans work, click here and here.)

The main advantage is that, initially at least, your monthly payments are lower than they would be with a conventional loan.

So, for example, if you were to take out a $250,000 interest-only loan with a 5 percent rate and no principal payments due for five years, your initial monthly payment would be $1,042. That's $300 less than the $1,342 you would pay each month for a conventional five-year adjustable mortgage with the same rate.

But there's no free lunch. By postponing principal payments, the balance on your loan doesn't decline and that means you pay more interest over the long run. It also means that when you eventually begin making principal payments, the payment on your loan will jump quite a bit.

Sticking with the same example, at the end of five years, your monthly payment would jump $420 to $1,462. The jump will be even more if it's an adjustible loan and rates go up.

Whether they make sense depends on your financial situation and what you're trying to achieve.

Some people turn to an interest-only loan because the lower initial payments allow them to buy a more expensive house.

But keep in mind that when the principal payments kick in, you'll need enough income to make those higher payments. You could figure that maybe you'll be able to refinance at a lower rate when it comes time to repay principal. I'd say that's living on the razor's edge.

Others may prefer an interest-only loan because it frees up cash that can be put to other uses, such as investing. Some lenders use this rationale to market interest-only loans to wealthy clients.

This strategy can pay off, provided you're able to earn a higher return on that money than the rate on your mortgage.

With mortgage rates in the 5 to 6 percent range, that may seem like an easy thing to do. Keep in mind, though, that while the "return" you earn by repaying principal on your mortgage is steady, the return on your investments will likely vary.

In short, there are both opportunities and risk to taking out an interest-only mortgage, perhaps the most visible risk being that your mortgage payment could jump substantially.

If you're considering an interest only mortgage, I recommend you give long and hard thought to how much you're paying for the loan both in interest, points and other fees compared with a conventional loan with a similar term; why you're turning to this type of loan; what you expect to get from it; what mortgage payment you might be paying when the loan converts to repaying principal; and what flexibility you have if things don't work out as favorably as you expect.

If you're not willing to do this sort of analysis, you're probably better off going with a conventional loan.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Mondays.