Many people took out adjustable rate mortgages during the Great Housing Bubble. After 25 years of steadily declining interest rates, people forgot about, or never knew about the risk of rising interest rates and what it would do to their housing payments. Adjustable rate mortgages are great while interest rates are declining. Their payments are lower than fixed rate mortgages, and as interest rates decline, they become an even better deal. However, when interest rates go up again, these loans will become a nightmare.

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Many people took out adjustable rate mortgages during the housing bubble. After 25 years of steadily declining interest rates, people forgot about, or never knew about the risk of rising interest rates and what it would do to their housing payments. When interest rates go up again, these loans will become a nightmare.

Source: The Real Articles: Finance | Stock Market Investing

Interest-only and negative amortization payments cannot go on forever. At some point, the loan balance must be paid in full. For all adjustable rate mortgages, there is a mandatory recast after a fixed period of time where the loan reverts to a conventionally amortizing loan to be paid over the remaining portion of a 30 year term.

Source: The Real Articles: Finance | Stock Market Investing