Reset frequency

Reset frequency

The frequency with which the floating rate changes.

Reset Frequency

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.