Feds are hiking rates. Consumers are eager to find substitutes. The adjustable rate mortgage, or ARM, may come back in style again.

Why is it useful? They are hybrid programs offer lower interest rates than the traditional 30 year product as a way to entice consumers to agree to shorter fixed intervals.

Loans make money throughout its life. If the rate is better in the beginning for the consumer, the bank making the loan hopes to make more money in the later stages of the loan. If the opposite is true, the bank will make more money in the front end. This is what occurs in the primary mortgage market. The secondary mortgage market involves selling bank notes and bundling them at discounts for other note holders to purchase, but that will not be discussed here because we are focusing on how the consumer can get better rates.

ARMs have had a bad reputation as they were part of a toxic loan underwriting culture during the mortgage meltdown of 2007, but if their terms are disclosed fully and the consumer consents and understands them, there is no issue to try these products that offer some fixed interest rate and, later, a variable rate interest down the road.