finance

margin

In an adjustable-rate mortgage, the margin is the fixed number of percentage points a lender adds to an index to set the borrower's interest rate at each adjustment. The index moves with the market, but the margin stays the same for the life of the loan. The resulting rate, index plus margin, is called the fully indexed rate, subject to any rate caps.

Exam tip
Index changes; margin does not. The formula is index plus margin equals the note rate, limited by caps.
Example
If the index is 4.0 percent and the margin is 2.5 percent, the borrower's adjusted rate is 6.5 percent.

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Last verified: 2026-10-23