The Adjustable-Rate Mortgage Gamble Is Back

Rising mortgage rates are fueling demand for adjustable loans
Photograph by Tom Nagy

When Los Angeles resident Jung Lim went shopping for a bigger house for his expanding family, his lender offered him an adjustable-rate mortgage with an interest rate about a percentage point cheaper than a fixed loan. The professor of dentistry figures the money he’ll save makes up for the extra risk. “If I could have gotten a 30-year fixed at the interest rate I’m getting the ARM for, I would have felt a lot more comfortable,” says Lim, who’s trading up to a $1.12 million, four-bedroom house in the Sherman Oaks neighborhood. “But I’m hoping to refinance in five years or less. And we’ll be in the house for about 10 years, so we could also sell. Hopefully prices have bottomed so we won’t be under water then.”

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