A main reason to consider adjustable rate mortgages is that you may end up with a lower monthly payment. The bank (usually) rewards you with a lower initial rate because you're taking the risk that interest rates could rise in the future. Contrast the situation with a fixed rate mortgage, where the bank takes that risk. Consider what happens if rates rise: the bank is stuck loaning you money at a below-market rate when you have a fixed rate mortgage.

On the other hand, if rates fall, you'll simply refinance and get a better rate. A survey by the Consumer Federation of American found that low-income and minority home buyers are more likely to choose adjustable-rate mortgages, even though they're less likely to understand the potential risks. If you're considering an adjustable-rate mortgage, make sure you understand how much your payments could increase if interest rates rise. The CFA survey found that young, low-income and minority borrowers underestimated how much their payments could increase by 40% to 50%.

While this may sound risky, an adjustable rate mortgage can be a good option for some people. One great benefit is that for the first year of your mortgage, you'll pay a special fixed interest rate that is often the lowest rate available on any kind of loan. So, if you're looking to sell your property very shortly after buying it as an investment, an adjustable rate mortgage can be a great way to save on interest rate payments for the short time you will have to make them. Of course, staying in the home for a longer term means having to deal with a fluctuating rate once the first year ends. This is why it's a good idea to try and get a sense of where interest rates are headed over the next few years before buying an adjustable rate mortgage.

While no predictions are perfect, if you can be sure you'll be able to sell your home within a few years, before interest rates get too high, an adjustable rate mortgage may still be worth it. It also depends on your financial situation. If you have a steady income and are comfortable with a rate increase, it may be a safe bet for you to purchase an adjustable rate mortgage.