Some of the dangers of adjustable mortgage interest rates are rates that can rise over time, causing mortgage payments to rise, according to Bankrate. Adjustable-rate mortgages reset to a new rate after one to seven years. Borrowers must be able to afford the higher payments after reset.
The borrower in an adjustable-rate mortgage transaction takes part of the interest rate risk from the lender. Risk to the borrower is the reason why adjustable-rate loans have a lower interest rate than traditional fixed-rate mortgages. An adjustable-rate mortgage works well for a homeowner who gets out of the loan before the first interest rate adjustment, according to Bankrate.