Margin ARM

Used with adjustable-rate mortgage (ARM) loans when calculating periodic interest rate adjustments. When the ARM rate is adjusted, the margin is the additional constant rate added to the index rate to calculate the new ARM rate. The margin is established and fixed at the beginning of the loan, in the promissory note. For example, a conforming Treasury Bill ARM reaches its one-year anniversary. Its margin is 3.00, as established in the original promissory note. At the time of the rate adjustment, the average T-Bill index rate has been calculated at 4.250%. The margin is added to the T-Bill index for a new rate of 7.250%; however, this is subject to the periodic and lifetime caps applicable with the specific ARM program. For more information, see the "ARM Loan" article in the "Loan Programs" section.

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