Mark Baudler, a San Francisco attorney, last month traded a 30-year mortgage with a 4.5 percent fixed rate for an adjustable loan at 2.5 percent, cutting his $5,500 monthly mortgage bill almost in half.

“I’m going to take the money I save and plow it right back into the mortgage,” said the partner at Wilson Sonsini Goodrich & Rosati, a law firm that specializes in securities and intellectual property law. “If the rates go nutty when the loan adjusts, I’ll be able to handle it.”

Others, like Los Angeles buyer Lim, are basing their decision to get an ARM on their plans to move from a property in a set number of years. Vivian Cohn in Hollister, California, lowered her monthly mortgage payments to about $940 from $1,400 in May when she took out a 5-1 ARM, meaning the rate is fixed for the first five years. After that, her 2.2 percent initial rate could adjust as much as 5 percentage points higher.

Confident Borrowers

Cohn doesn’t see the threat of a rate change as a problem. When she retires in two years, she and her husband are moving to Panama, Cohn said. If they can’t sell the house at that point, they’ll rent it for the following three years and sell then, before the loan adjusts, said the 60-year-old human resources manager at a Silicon Valley company.

“A fixed rate isn’t for everybody,” Cohn said. “We know we’re moving so there’s no point in paying for a guaranteed rate if we won’t use it.”

Regardless of how confident borrowers are of their plans to stay in a home for a limited time, there are no guarantees home prices will provide them the opportunity to refinance or sell, said Erin Lantz, director of Zillow’s Mortgage Marketplace, an aggregator of loan rates.

“On a national basis, home prices probably will continue to rise, but it’s more difficult to predict by region,” Lantz said. “If you go underwater, you’re going to have to bring money to the table to get out of that mortgage.”

Another assumption of ARM applicants is that their income will be higher by the end of the loan’s fixed period so they can handle higher payments if they can’t sell, said Henry Savage, president of PMC Mortgage Corp.

“When you start making those calculations, you’re playing golf in the dark,” said Savage.