With an adjustable rate mortgage, you pay according to an interest rate that changes from time to time. Don't think this is some free lunch or gift of gratitude from the lender. One of the real reasons for the teaser rate is to allow one to qualify for a larger mortgage. During economic times when too many of these mortgages are going into default, expect lenders to use the projected cost of the loan in it's second year to determine the amount of loan you are qualified to take. The 3 and 5-year adjustable rate mortgages adjust less frequently.
Balloon mortgages are mortgages that are based on a fixed rate for the specified period of time.
These rates are often lower than the fixed rate mortgages because of a lower risk margin for the lender. At the end of the fixed rate period, the mortgage becomes due. You can generally continue the mortgage beyond the balloon period at whatever the current interest rates are at that time. But be careful. Read the fine print.