ARM - Loan Margin
Loan Margin is the difference between the mortgage loan rate and its underlying index (on which the note rate is based).
For example, a mortgage interest rate may be specified in the loan note as being MTA plus 2%, 2% being the margin and MTA being the index.
Note: All adjustable rate mortgages tie their interest rate to an index. Some common indices are:
- 11th District Cost of Funds Index (COFI)
- London Interbank Offered Rate (LIBOR)
- 12-month Treasury Average Index (MTA)
- Constant Maturity Treasury (CMT)
- National Average Contract Mortgage Rate