What Are the Pros and Cons of an Adjustable Rate Mortgage?

Adjustable rate mortgages got a really bad reputation during the Great Recession, but now they’re back in a big way. In fact, they’re more popular than they’ve been in 15 years.

Hordes of homeowners began defaulting on their adjustable rate mortgages back in 2008, contributing to a massive housing crash. ARMs have since become more heavily regulated and are less likely to break the economy into a million pieces.

Today’s homebuyers are increasingly choosing ARMs to save money as mortgage rates keep rising highermaking monthly mortgage payments painfully expensive. And the Federal Reserve has indicated it’s still concerned about inflation, which likely means additional interest rate hikes are coming.

But is an adjustable rate mortgage the right move for you? We asked a bunch of financial experts and mortgage brokers for their honest opinions, and what they had to say was eye-opening.

What Are the Pros and Cons of an Adjustable Rate Mortgage?

With a fixed rate mortgage, you’ll pay the same interest rate on your mortgage for the entire length of your home loan, most commonly 15, 20 or 30 years. Not so with an adjustable rate mortgage. ARMs start out with a lower, more affordable interest rate for a set period, like 5 to 10 years. After that, they “adjust” to a variable interest rate, based on whatever the market rate is at the time.

Let’s look a little closer at the pros and cons of an adjustable rate mortgage.

Adjustable Rate Mortgages Are Riskier

Interest rates on ARMs can go way up after the initial low-interest period, making your monthly payment a lot harder, if not impossible, to afford. That’s what happened to a lot of people in the last big housing crash.

It’s a risk that more people are willing to take these days, though, because inflation and the Federal Reserve’s rate hikes have jacked up mortgage rates to the highest they’ve been since 2008.

Picture an adjustable rate mortgage where the interest rate is…