what is a teaser rate

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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.

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A teaser rate is a type of interest rate that is often offered by mortgage companies in order to entice individuals to refinance. This type of mortgage rate is often associated with adjustable-rate mortgages. The teaser rate will be much lower than the average interest rates that are currently available in the market.

A teaser rate often exacerbates this issue. As you can see, ARMs can have complex implications. Thus, as is the case with any mortgage or other loan, borrowers must be sure to read and understand the lender’s documentation and contemplate the implications of changes in interest rates.

Bankrate’s Doug Whiteman defines the term teaser rate and explains how credit card issuers get new customers in the door with a low introductory rate. Mortgages Get the Best Rates

What is a teaser rate? It is a low interest rate that applies at the start of the loan for a specified period of time, not the entire term of the loan. Questions you should ask regarding these types of loan: How long is the teaser rate in effect?

Teaser rates and adjustable-rate mortgages (ARMs) It’s true that adjustable-rate mortgages have introductory interest rates that last for a designated length of time before changing. For example, a 5/1 adjustable-rate mortgage will carry a fixed rate for the first five years.

A teaser rate is usually an artificially low initial interest rate on an adjustable-rate mortgage (ARM). How it works/Example: The interest rate on the ARM corresponds to a specific benchmark (often the prime rate , but sometimes LIBOR , the one-year constant-maturity Treasury, or other benchmarks) plus an additional spread (which is also called the margin , and its size is often based on the borrower’s credit score ).

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