The frequency with which the floating rate changes.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
In adjustable-rate loans, the rate at which changes to a loan's interest rate occur. Sometimes, the interest rate changes once a year, but some loans change interest rates as often as once a month or as seldom as every five years. The higher the reset frequency, the higher the financial risk for the homeowner. For example, if the reset frequency is once a month, a homeowner could find his/her mortgage payment increasing every month for five months before it goes down again. This ties up more of the homeowner's income and increases the likelihood of default.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved