Definition
The fixed percentage added to an ARM's index rate to determine your interest rate after the initial period ends. The margin is set at origination and never changes. Example: 5.0% index + 2.5% margin = 7.5% adjusted rate.
Related Rates & Terms Terms
The process of paying off a loan through regular monthly payments over time. Early in an amortizing loan, most of the payment covers interest. As the loan matures, more goes toward principal. A 30-year mortgage is fully amortized over 360 payments.
A financing arrangement where points or seller concessions are used to reduce the mortgage rate. A temporary buydown (like 3-2-1) lowers the rate for the first few years; a permanent buydown reduces it for the loan's full term.
A limit on how much an ARM's rate can change at each adjustment period or over the loan's lifetime. A common structure is 2/2/5, meaning 2% max at the first adjustment, 2% at each subsequent adjustment, and 5% over the life of the loan.
The maximum loan amount eligible for purchase by Fannie Mae and Freddie Mac. For 2026, the baseline conforming limit is $806,500. Loans above this threshold are jumbo loans and follow different underwriting guidelines.
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