You can also find values of indexes in the H15 Federal Reserve statistical release and in business newspapers. The margin is fixed percentage points added to the index to compute the interest rate. The result will then be rounded to the nearest one-eighth of a percent. The nearest to 0. The margins remain fixed for the term of the loan and are not impacted by the financial markets and movement of interest rates.
Lenders use a variety of margins depending upon the loan program and adjustment periods.
Most ARMs have an interest rate caps to protect you from enormous increases in monthly payments. A lifetime cap limits the interest rate increase over the life of the loan. A periodic or adjustment cap limits how much your interest rate can rise at one time. Your mortgage disclosure will tell you the exact index, to be used, whether the weekly or monthly value applies, the lead time for your index, the margin, and any caps. Negatively amortizing loans Some types of ARMs offer payment caps rather than interst rate caps, which limit the amount the monthly payment can increase.