Fixed-rate mortgage: This type of home loan carries the same interest rate for the entire term
(length) of the loan. The interest rate makes up part of your monthly payment. It's also the only component that has the potential to change over time. So if you get a mortgage with a guaranteed
fixed rate, your monthly payment is guaranteed to stay the same -- for the entire life of the loan.
Adjustable-rate mortgage: These are also referred to as ARM loans for short. Unlike the previous
option, this type of mortgage has an interest rate that changes over time. This also means that the size of your monthly payment will change over time. It might adjust up or down, depending on market
conditions at the time of adjustment. But they usually adjust upward, resulting in a larger monthly payment.
Hybrid ARM loan: Most of the adjustable-rate mortgages offered today are considered "hybrid"
loans. They get this name because they start off with a fixed rate for a certain period of time. After that period, the rate will begin to adjust. The most popular example is the 5/1 ARM loan, which carries a fixed rate of interest for the first five years. The rate
will change every year after that. Some lenders offer 1-year, 3-year and 7-year ARMs, as well.