What Are Some Dangers of Adjustable Mortgage Interest Rates?


Quick Answer

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.

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Full Answer

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.

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