In the wake of the subprime mortgage implosion, tales of homeowners going broke when their payments increase have taken on the universality of parables.At the heart of these stories lurks a seductive villain: the adjustable-rate mortgage. As the prevailing wisdom goes, the loan product lures homeowners into a legal bait and switch - dangling tantalizing teaser rates before their hungry eyes, then revealing an adjustable rate that rears up like a Loch Ness monster from serene waters and devours the homeowner whole.
In this context, it's easy to regard all adjustable-rate mortgages as bad news. But the facts are far more complex.
Sure, many people got adjustable-rate mortgages they didn't understand and ultimately couldn't afford. And now that the 30-year fixed rates have dropped to 5.48 percent, their lowest level in four years, and one-year ARM starter rates are at 4.99 percent, the differential is only about a half a percent. So it's not the most attractive time to shop for an adjustable-rate mortgage.
