The home buyer should be aware though, that the caps on adjustable rate mortgages can be very high, and the interest rate on the mortgage could still rise to a point where the home owner would have trouble affording the monthly payments on the mortgage loan.

When considering an adjustable rate mortgage, it is a good idea to use a mortgage loan calculator to determine what the monthly payments would be if the worst case scenario came about and the interest rate rose to the highest allowable level. Before signing up for a variable rate mortgage, the home buyer should be absolutely sure that they will be able to make the payments in this case. Failure to do so could result in the loss of the home you have worked so hard to buy.

When you sign up for an adjustable rate mortgage, you are essentially betting that interest rates will be lower in the future than they are today. The problem with this strategy is that even professional money managers often are unable to accurately predict the direction of future interest rates. The danger in an adjustable rate mortgage is that interest rates will rise instead of falling, and that your monthly mortgage payments will rise right along with those interest rates.