What is the percentage added to the index of an adjustable-rate mortgage called?

The percentage added to the index of an adjustable-rate mortgage is called the Margin. In the context of adjustable-rate mortgages (ARMs), the index is a benchmark interest rate that fluctuates based on market conditions, such as the LIBOR or Treasury rates. The Margin is a fixed amount decided at the origination of the loan that lenders add to the index rate to calculate the total interest rate that the borrower will pay when the loan adjusts.

This distinction is important because it affects the overall cost of borrowing for the mortgage. The Margin remains constant throughout the life of the loan, while the index can vary. Understanding this concept is crucial for borrowers who are considering an adjustable-rate mortgage, as it impacts their monthly payment amounts when rates adjust.

In contrast, terms like Base Rate, Spread, and Adjustment Factor refer to different concepts in financial contexts, but they do not specifically indicate the fixed percentage that is added to the fluctuating index rate to determine the interest rate on adjustable-rate mortgages.