Adjustable rate mortgages are frightening to a lot of people, but in the current market they're worth a second look.

Nationally, the going rate for a one-year ARM is about 8.18 percent, but in some cities you can get rates closer to 7.75 percent. For a 30-year fixed-rate mortgage, you'll pay at least 10 percent in most markets and close to 10.5 percent in California, New York and Massachusetts.That means the ARMs are 2 to 2.5 percentage points less, which makes a huge difference in your monthly payments.

On a mortgage of $120,000, monthly payments on an 8 percent ARM would be $880, compared with $1,053 on a 10 percent fixed-rate mortgage.

The $173 a month difference would save you $2,076 in the first year of the mortgage.

In the second year, if your 8 percent rate rose to 10.75 percent, your payments would increase to $1,120. That's $67 a month more than you'd be paying with the 10 percent fixed rate mortgage. But you could make those higher payments for 31 months before you "used up" the $2,076 you saved in the first year.

In this scenario, the homebuyer with an ARM would come out ahead financially for at least 3 1/2 years.

David Olson, a mortgage analyst for SMR Research in Columbia, Md., says the short-term interest rates to which ARMs are tied are likely to remain stable or lower for "at least two years."

"There's no way the Fed (Federal Reserve Board) is going to raise short-term rates," he said. "They're going to lower those."

Olson anticipates the country will be in a recession for 10 months or so and then slowly recover, with short-term interest rates staying low the entire time.

"So it (an ARM) is probably a good deal," he said. "If I were going to buy a house now, I would take an ARM. You pay less interest and that's the whole story."

If the idea of a mortgage that changes rates every year makes you too nervous, lenders offer a slew of variations. You can get ARMs that give you the option of converting to a fixed rate at certain times, or you can get a rate that stays fixed for several years and then begins to adjust. For each of these features you pay a price, but they can be a good buy.

For example, a three-year ARM - one in which the rate stays fixed for three years - is going for on average for 9.66 percent right now. At that rate, your monthly payments on a $120,000 mortgage would be $1,020.

Here's how three mortgages compare in cost over three years:

- 30-year fixed rate at 10 percent interest - $1,053 a month or $37, 908 over three years.

- One-year ARM starting at 8 percent for the first year and jumping to 10.75 percent in the second and third years - $37,459 over three years.

- Three-year ARM at 9.66 percent - $1,020 a month or $36,720 over three years.

As you can see, the three-year ARM is the best buy in this case.

But if the one-year ARM had risen to less than 10.75 percent - a good possibility in the current market - it would have been the best choice.

In any case, the fixed-rate mortgage would have been the most expensive.

Despite the cost drawback, most home buyers prefer a fixed-rate mortgage. They want to know for sure what the mortgage payment will be year after year.

Currently, fewer than 25 percent of homebuyers choose an adjustable-rate mortgage. But it's an option worth considering as the nation moves into a recession.