Most people like to know what their mortgage payments will be, not only next month but for years to come, which is why adjustable rates become unpopular whenever fixed rates are affordable.

For the past several years, ARMs have accounted for only 20 percent to 30 percent of new mortgages. The prevailing opinion is, why take a risk with adjustable rates when you can get a 30-year fixed rate in the 9.5 percent to 10.5 percent range.Many buyers who opt for an ARM find it unsatisfactory. Right now, many thousands of homeowners are taking advantage of current rates - still under 10 percent - to get rid of ARMs.

But in some situations, an adjustable mortgage can be the smartest choice.

For example, suppose you're a rising young sales executive and your territory changes frequently as you move up in your company. When you are transferred to a new city at this stage of your career, you anticipate a stay of three years or less. An ARM makes good sense for you.

Say you find an ARM that starts at 7 percent interest. It will not rise more than 2 percentage points a year or more than 6 percentage points over the life of the loan. The annual rate is adjusted with the one-year Treasury bill index, which is paying 6.5 percent interest about now. Your margin above the index is 3 points.

Here's what could happen to your mortgage:

Best case: Treasury bill stays at 6.5 percent

Year 1, 7 percent

Year 2, 9 percent

Year 3, 9.5 percent

Average 3 years: 8.5 percent

Medium case: Treasury bill at 8.5 percent

Year 1, 7 percent

Year 2, 9 percent

Year 3, 11 percent

Average 3 years: 9 percent

Worst case: Treasury bill at 20 percent

Year 1, 7 percentYear 2, 9 percent

Year 3, 11 percent

Average 3 years: 9 percent

As you can see, the most you'll pay on average over three years is 9 percent no matter how high the Treasury bill goes because your rate cannot rise more than 2 percentage points a year. If the T-bill rate remains at 6.5 percent, you'll pay even less.

In this case, unless you can find a fixed-rate mortgage with a 9 percent interest rate, you're better off with the ARM, assuming the points charged on each mortgage are the same.

Here are some other factors to consider when looking at ARMS, courtesy of American Residential Mortgage Corp. of Alexandria, Va.:

- Generally, the lower the initial rate, the better the scenario over the first few years, even the worst-case scenario. But when you start with a very low rate, the worst case is more likely to actually occur since you're so far below market rates.

- When comparing ARMs, assume that one extra point raises the interest rate on the mortgage 1 percentage point for one year. So a 6 percent initial rate with four points would be the same as a 7 percent initial rate with three points, assuming the caps and margins are the same.

- In the short term, the starting rate and the annual cap are the most important factors. The lower the rate and the lower the cap, the better.

- If you plan to keep an ARM for a longer term, the margin and the lifetime cap become more important. The margin is important in better scenarios because it determines how much you pay above the index. The lifetime cap is important in worst-case scenarios because it caps the amount you'll have to pay if interest rates rise substantially.

- To compare an ARM to a 30-year fixed rate, figure out the worst-case scenario for the number of years you plan to be in the house and get the average interest rate you'd pay over that period. Compare that to the fixed rate currently available.

When you do this, ARMs almost always lose if fixed rates are in the 9 percent to 10 percent range, unless you plan to stay in the house only a short time.

So, if the idea of an ARM appeals to you and your best guess is that interest rates will remain fairly low, try a couple of other scenarios before making a decision.