Teaser rate

Teaser rate

A low initial interest rate on an adjustable-rate mortgage to entice borrowers, that is later eliminated and replaced by a market-level rate.

Teaser Rate

In an adjustable-rate mortgage, an initial interest rate that one pays for a certain period of time, at which point the interest rate rises. A teaser rate exists in order to encourage people who would otherwise be unable to qualify for a mortgage to be able to buy a house. While a lender is required to disclose the higher interest rate and payment, their existence has been accused of creating a perverse incentive for unqualified borrowers to buy houses. Many believe this contributed to the housing bubble and the subsequent credit crunch.

Teaser rate.

A teaser rate is a low introductory interest rate on a credit card or an adjustable rate mortgage (ARM). The lender must tell you how long the teaser rate lasts and what the real cost of borrowing will be at the end of the introductory period.

teaser rate

A below-market rate for the initial period of an adjustable-rate mortgage.It is intended to attract borrowers to this type of loan. Interest usually adjusts to market rates or even somewhat higher on the first allowed adjustment date.

Teaser Rate

The initial interest rate on an ARM, when it is below the fully indexed rate.

See Adjustable Rate Mortgage (ARM)/Fully-Indexed Rate.