Types of Mortgage Loans
Fixed-rate mortgages are those where the interest rate stays the same (fixed) for the life of the loan. Even if interest rates double, your payment stays the same. If interest rates drop dramatically, you may be able to refinance and take advantage of the lower rates.
Adjustable-rate mortgages are just that - adjustable. They typically have a low introductory rate that's guaranteed for a certain period of time; after that, your rate rises and falls along with interest rates in general. If you're considering an adjustable loan, it's vitally important to run the numbers and see what rising interest rates would do to your mortgage payment. There's never a guarantee that rates will stay low, and a dramatic increase could put you in a real bind. However, if you're only planning to stay in your new home for a few years, an adjustable mortgage may make sense for you.
Hybrid mortgages have a fixed interest rate early in the life of the loan, shifting to an adjustable rate in later years. As with adjustable mortgages, it's important to do the math to see what rising rates will do to your payment.