Get ready for the rapid spread of yet another type of home mortgage: one with adjustable rates and is convertible into a fixed-rate loan. They've been around for a while, but with so many restrictions that few people were interested. Now they're being liberalized and could become enormously popular.

What's the big deal about the new approach? It can save you money, if the loan is competitively priced.

Say you had an adjustable-rate mortgage (ARM) and tried to switch to a fixed-rate loan last spring, when interest-rate levels touched down at around 8 3/4 percent. First, the jam at the mortgage window might have been so heavy that you missed your chance. Second, the upfront cost of refinancing might have run three to five points or more. (One point equals 1 percent of the loan amount.) That's a heavy charge.

By contrast, a convertible ARM lets you switch to a fixed-rate loan for as little as $250, or one point plus $250. You can normally get through the paperwork in two to four weeks (some lenders say six), even during a refinancing crunch.

Consider this new ARM if:

You can't afford today's fixed-rate loan at about 10.25 percent, so an ARM is your only option. But you plan to switch as soon as the payment level looks right.

You expect interest rates to fall over the next few years, so it makes no sense to take a fixed-rate loan. You'd rather start out with an ARM and be ready to pounce when lower rates arrive.

You want some protection if rates jump. With a convertible ARM, you can arrange to switch to a fixed-rate mortgage without running into abnormal delays.

That's the good news. The bad news is that you might pay for this flexibility in other ways, so go over the lender's disclosure sheet carefully to understand all the details. If there's no disclosure, walk away.

It's important to determine how much, if anything, the lender charges for the right to convert and what it means over the long run in dollars and cents.

At RealCorp in San Francisco, for example, a convertible ARM costs three-eighths of a point more in the first year than a standard ARM. Sterling S&L in Irvine, Calif., starts out at three-quarters of a point more, so your monthly payment is a little higher. But starting in the second year, both types of ARMs will be priced the same.

At other lenders, however, a convertible ARM might carry a lower rate. First Union Mortgage in Charlotte, N.C., prices its at three-quarters of a point less than the one-year ARM offered on mortgages backed by the Federal Housing Administration.

Another point of comparison is what happens to the loan in the second year if you don't convert. Any ARM floats by a fixed amount over the index it's tied to. A convertible ARM might float a little higher than a regular one, making it costlier. Or it might float at the same level.

Yet another question is what interest rate you'll get when your ARM is converted to a fixed-rate loan. Sterling S&L and LendMor Corp., on Long Island, now charge about an eighth of a percentage point more for their converted mortgages.

By contrast, RealCorp's president, Duncan Gamlen, says he plans to offer the same interest rate that he does on new fixed-rate mortgages. There's no guarantee, but right now both loans are going for 10.125 percent.

At Home Owners Federal in Boston, the two rates will always be the same. "The loan document says that the {convertible} rate will be the one posted for new loans," said Frederick Biel, executive vice president. Right now, that stands at 10.25 to 10.5, depending on the number of points you pay.

The new firepower behind convertible ARMs is the Federal National Mortgage Association, which just approved a more liberal loan than it has accepted in the past. But it will cost at least 1 point to convert a Fannie Mae ARM to a fixed-rate loan. The lender can tack on a further processing fee of as much as $250.

By contrast, Home Owners Federal just lowered its entire fee to $250 because of heavy competition. Sterling charges $300 to $400. So shop for fee as well as interest rate.

Lenders also differ on how long they'll keep the window open. Fannie Mae-style loans let you convert during the first two weeks of any month, after the first year and before the end of the fifth year. You get the rate charged on the first day of that month.

Home Owners Federal limits you to the same period, but allows switching any time during the month, at the rate on that day. At Sterling, you'll get whatever rate prevails on the day they finish processing your loan, with a maximum of 30 days.

RealCorp lets you convert at any time during the life of the loan. You can't get more flexible than that.