Variable Mortgages May Never Make a Comeback
Even with soaring interest rates making traditional loans unaffordable, homebuyers aren't likely to renew their old love affair with adjustable-rate financing.
ARMs risk short-term gain for long-term pain.
Photographer: Allison Dinner/Getty Images
Adjustable-rate mortgages, or ARMs, have a bad reputation with homebuyers who have long viewed them as a dangerous financial trap. But with rates on fixed-rate mortgages more than doubling in the past year, some borrowers are taking a second look. The idea of paying less now in exchange for the risk of paying more later seems reasonable if you believe rates are nearing their peak.
By sticking to a traditional 30-year, fixed-rate mortgage, homebuyers could be paying more than necessary in a market where rates may be more likely to move down than up in the next few years — or at least level off.