Interest rate stays the same for the term of the loan.
Your payments are predictable and not affected by interest rate changes in the market.
Interest rates could go down while you are locked into your mortgage at a higher-than-market rate.
Interest rate can increase or decrease during the term of the loan.
You might have a low rate for an initial period of 1, 3, 5, 7, or 10 years.
Monthly payments may initially be lower than fixed-rate loans.
The interest rate and your payment can increase significantly throughout the term of the loan.
If interest rates rise, do not count on being able to refinance into a lower rate fixed-rate loan, as your financial situation could change (e.g., due to a job loss)—and still, refinancing to a rate lower than the going rate may not be possible.
Interest Rate v. Annual Percentage Rate (APR)
The interest rate does not factor in any of the non-interest closing costs. Compare loan offers using the Annual Percentage Rate (APR). Think of the APR as a “fully loaded price tag.” In other words, it combines the cost of both the interest and some–-but not all–-of the non-interest closing costs, and then calculates that combined cost as a yearly rate.