Adjustable-rate mortgages have gotten a pretty bad rap since the housing market tanked a few years ago. After all, the over-availability of ARMs undeniably contributed to the housing bubble and following foreclosure wave. So readers of my recent piece in MONEY’s November issue, “Is it Time to Dump Your ARM?,” might have been surprised to see a recommendation that some homeowners refinancing out of one ARM should refinance into another one.

That’s because despite their flaws, hybrid ARMs, which start out with a fixed-rate period and then adjust on a recurring basis when that period is up, still represent a smart choice for educated borrowers who understand their risks. Yes, many borrowers got hoodwinked into ARMs that cost them their homes, but thousands of homeowners have also benefited from the savings provided by properly used ARMs. The mortgage gurus over at HSH Associates have written at length on this topic, in an interesting recent piece that argues that ARMs are “neither evil nor toxic.” …read more