DEFINITION of 'Reset Date'

The point in time when the initial fixed interest rate on an adjustable rate mortgage changes to an adjustable rate. This date is commonly one to five years from the start date of the mortgage. After the initial reset date, the interest rate will continue to reset as often as once a month.

BREAKING DOWN 'Reset Date'

The new interest rate calculated on the reset date will be based on an index value such as the interest rate of one-year Treasury bonds or the London Interbank Offered Rate. This rate fluctuates as market conditions change. The other component of the interest rate in an adjustable rate mortgage is the lender's margin, which does not change during the life of the loan.



RELATED TERMS
  1. Reset Rate

    The new percentage of interest that a mortgagor must pay on the ...
  2. Hybrid ARM

    A hybrid adjustable-rate mortgage blends the characteristics ...
  3. Adjustment Date

    1. The date on which financial adjustments will be made to a ...
  4. Reset Margin

    The difference between the interest rate of a security and the ...
  5. Periodic Interest Rate Cap

    A part of an interest rate cap structure on loans and mortgages. ...
  6. Variable Rate Mortgage

    A type of home loan in which the interest rate is not fixed. ...
Related Articles
  1. Personal Finance

    Adjustable Rate Mortgage: What Happens When Interest Rates Go Up

    Adjustable rate mortgages can save borrowers money, but they can't go into it blind. In order to benefit from an ARM, you have to understand how it works.
  2. Personal Finance

    What is a Subprime Mortgage?

    Subprime mortgages are offered to borrowers with low credit ratings, usually 600 or below.
  3. Personal Finance

    5 Secrets You Didn't Know About Mortgages

    Being savvy about the ins and outs of mortgages can mean big savings in the long term.
  4. Insights

    How Interest Rates Affect the Housing Market

    Understand how rate changes can affect home prices and learn how you can keep up.
  5. Personal Finance

    This ARM Has Teeth

    Find out how to avoid getting bitten when your mortgage rate resets.
  6. Personal Finance

    The Best Candidate For an Adjustable Rate Mortgage

    Adjustable-rate mortgages aren't for everyone, but they make sense if you are a short-term homeowner or can pay off the loan before it readjusts.
  7. Personal Finance

    It's All Related: Interest, Mortgages, the Economy

    The article looks into the relationship between the economy, interest rates and mortgage rates.
  8. Investing

    The Most Important Factors that Affect Mortgage Rates

    Discover what the most important factors are that affect mortgage interest rates. Factors range from inflation and economic growth to Federal Reserve activity, .
  9. Financial Advisor

    Effect of Fed Fund Rate Hikes on the Housing Market

    Understand what drives the federal funds rate and why the Fed would increase that rate. Learn about the effect of a rate increase on the housing market.
  10. Personal Finance

    Mortgages: Fixed-Rate Versus Adjustable-Rate

    Both of these have advantages and disadvantages depending on your financial needs and prospects.
RELATED FAQS
  1. Is an adjustable rate mortgage (ARM) safe?

    Learn why an adjustable rate mortgage (ARM) can be a safe option as long as the borrower is familiar with the underlying ... Read Answer >>
  2. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
  4. What are the pros and cons of a simple-interest mortgage?

    Learn the difference between a simple interest mortgage and a standard mortgage, along with their relative advantages and ... Read Answer >>
  5. Do I own a stock as of the trade date or the settlement date?

    When it comes to buying shares, there are two key dates involved in the transaction. The first date is the trade date, which ... Read Answer >>
  6. How can an investor reduce interest rate risk?

    Learn about the different ways investors can reduce interest rate risk. Locking in interest rates increases certainty for ... Read Answer >>
Trading Center