Should I avoid teaser rates home loans and credit cards?
Answer:No. There is nothing to avoid about teaser rates home loans or credit cards, but one needs to be educated about how a mortgage or credit card works if they don't want to end up in debt, or experience huge unexpected payment increase.
Teaser rates mortgages will usually hold the low introductory rate for several months. Those most advertised to consumers as teaser rate home loans are Pick-a-Pay mortgage products. The minimum payment rate, advertised as teaser rate, actually leads to negative amortization.
An Option ARM minimum payment rate is wrongly offered to consumers as a teaser rate. Borrowers get the impression they are getting a very nice mortgage until the actual mortgage rate is applied and causes payment shock.
Mortgage loans with teaser rates usually have a catch to them - loan officers are rarely willing to disclose the catch. Unlike home loans, credit card teaser rates may have no catch to them. A 0% starting rate for 3 months is common for some newer credit cards and the eventual interest rate is no higher than the regular ones.
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