Margin
The fixed percentage a lender adds to the index to set an adjustable-rate mortgage's rate after the fixed period. Index + margin = your rate.
What does margin mean?
The margin is the lender's fixed markup on an ARM — for example 2.75% — that stays constant for the life of the loan. Once the fixed period ends, your rate is the current index plus this margin. Because the margin never changes, it is worth comparing between lenders: a lower margin means a lower rate at every future adjustment, no matter where the index sits.
How the margin shapes your ARM
The margin is the lender’s fixed markup over the index and does not change for the life of the loan. Margins on many conventional ARMs fall in the 2.25%–3% range, but they vary by lender and product, so compare them the way you compare starting rates.
Together, index plus margin is the fully indexed rate — the rate the loan would carry today without caps or an introductory discount. If an ARM’s starting rate is well below the fully indexed rate, expect the payment to rise at the first adjustment even if the index never moves.
What 0.25% of margin costs
Because the margin applies at every adjustment for the rest of the loan, small differences compound. On a $300,000 balance with 25 years remaining, each extra 0.25% of margin adds roughly $45–$50 a month once the loan is adjusting — worth asking about before you lock.
Frequently asked
What is the margin on an ARM?
The margin is the fixed markup — say 2.75% — the lender adds to the index to set your rate after the fixed period.
It never changes, so a lower margin means a lower rate at every future adjustment; it is worth comparing between lenders.
Can the margin on an ARM change?
No. The margin is set in your loan documents at closing and stays the same for the life of the loan. Only the index moves, which is why comparing margins between lenders matters as much as comparing starting rates.
What is a typical ARM margin?
Many conventional ARMs carry margins between about 2.25% and 3%, but they vary by lender, product and borrower. Your Loan Estimate and the ARM disclosure list the exact margin — compare it across offers, because it applies at every adjustment.
Put it to use
Related terms
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