Borrowers choose adjustable-rate mortgages because the mortgage payments are initially lower. A lower initial payment makes the home more affordable at first, but the borrower must also be willing to accept the risk of and be confident in their ability to afford an increased mortgage payment, sometimes significantly higher. In some cases, there's even the possibility of an increasing loan balance or negative amortization.

To recap, getting a loan with adjustable payments results in lower payments at first but exposes you to some risk of high payments later. On the other hand, locking in steady predictable payments gives you a higher initial payment than the ARM, but you know exactly what you owe in principal and interest at any given time.

There are two basic categories of mortgages: the fixed-rate and the adjustable-rate mortgage (ARM). Within these categories, there are many variations. However, in nearly all mortgages, two factors are usually at odds: how predictable the payments are and how low, or affordable, they are at least initially.

Borrowers choose fixed-rate loans because the mortgage payments are steady and predictable, allowing for easier household budgeting and planning. But in so doing, they give up a lower initial mortgage payment.