All mortgage loans come with interest. The interest rate is expressed as a percentage, or what’s commonly referred to as the APR, annual percentage rate.
Mortgage loans can be fixed-rate or adjustable-rate. Fixed-rate mortgages tend to be the most common, especially among first-time home buyers. This means the interest rate will not change over time. Your monthly statement should stay the same, so you can budget your expenses accordingly.
Adjustable-rate mortgages (ARMs) come with adjustable interest rates. The loan will typically start off with a low interest rate. This is what’s known as the introductory period.
The interest rate will then go up after the introductory rate expires. The rate will change every month, quarter, year or more depending on the terms of the contract. ARMs typically cap the interest rate so that it can’t exceed a certain rate.
If you go with an adjustable-rate mortgage, try to pay off as much of the loan as possible during the introductory period. Most people choose fixed-rate mortgages, so they don’t have to worry about paying more interest down the line.