Mortgages are powerful financial instruments. It is essential that you read the document carefully and ensure that you understand the implications before you plunge into making a decision. Sometimes there are hidden features that could work to your disadvantage. Some of these features may not be hidden but are thought of by the people are as follows:

Prepayment Penalties: Many banks will actually penalize you if you close your loan before the intended duration. This is because it costs them money and marketing effort to find a new borrower who will pay them interest. However, many loans have unreasonable prepayment penalties. These are designed to lock you in the loan. Please ensure that you consider what happens if you wanted to close the loan before its intended term expires.

Negative Amortization: This is an area of dangerous personal finance, wherein a lender will initially charge you less than the interest cost and add the balance to your principle. Lets say you took a $100 loan and the interest works out to be $4. Initially, you will pay only $2 and the remaining $2 will be added to the principal which now stands at $102 and is compounding dangerously.

Interest Only Loans: In these loans, you just make the interest payments. These are mostly speculative bets made in the short term. However, since the leverage is so high, there could be serious loss if the market value of the property falls by even a small percentage.

Private Mortgage Insurance: A smaller down-payment requires you to pay for insuring the lender against losses. You are paying to insure the lender and will never be a beneficiary.