What is Foolsaurus?

It's a glossary of investing terms edited and maintained by our analysts, writers and YOU, our Foolish community.


Reset. ARMs are said to reset when their interest rate is recalculated using a formula specified in the agreement.

Expanded Definition

The intent is usually to track market interest rates. Hence, the reference point is usually some widely published average such as the Libor.

However, some mortgage lenders have been known to use teaser rates to attract business. Those rates can be far below market.

Borrowers are urged to fully investigate their interest rates before signing up for an ARM. You need to know what the monthly payments are likely to be when the teaser rate expires.

Related Fool Articles

Related Terms

Recent Mentions on Fool.com