Fully Indexed Rate – What is it?

When you get an Adjustable Rate Mortgage (ARM) you get an initial rate that is fixed for a certain period of time say five years for example. After the first five years of the loan, your interest will begin to adjust based on two factors: your index and your margin.  The mortgage interest rate that your mortgage loan will adjust to after the fixed period is called the Fully Indexed Rate.

Fully Indexed Rate is the combination of the index the mortgage lender has chosen plus the fixed margin the mortgage lender places on the mortgage loan. This is often different than the initial rate offered, or the start rate.  The fully indexed rate will only fluctuate at the adjustment period of your ARM, and may be subject to caps that determine how much they may increase within a certain time period. Keep Reading...