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. The interest rate will only be in effect for a few months in most cases. After that point, the interest rate will climb to a market interest rate that is generally much higher.

Teaser rates have come under scrutiny because of their impact on the general public. Many consumers that have signed up for these types of mortgages were not fully aware of what would happen after the teaser rate ran out. Many people think that they are signing up for a mortgage that has a very low interest rate for the entire term. Then when the teaser rate runs out, there payment goes up significantly. This can be devastating to a homeowner that has just refinance and spent thousands of dollars in closing costs. These types of rates are most commonly used when market interest rates are very high as a way to increase business. 

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