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Definition of Margin from Mortgage Glossary

Margin

The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. Margin is constant throughout the life of the loan.

INDEX + MARGIN = FULLY INDEXED RATE

Example using the 1 Year Treasury:

1 Year Treasury Index = 4.170
Loan Margin = 2.50
4.170 (Index) + 2.50 (Margin) = 6.67% (Fully Indexed Rate)

Since lenders round the rate to the nearest 1/8%, the actual rate would be 6.625%.

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