The amount of the margin can differ from one lender to another, but it is usually constant over the life of the loan. Let's say, for example, that you are comparing ARM's offered by two different lenders. Both lenders use the one-year Treasury index. Here is how that difference in margin would affect your initial monthly payment. In comparing ARM's, look at both the index and margin for each plan.
Some indexes have higher average values, but they are usually used with lower margins.
Be sure to discuss the margin with your lender. Very large discounts are often arranged by the seller. The seller pays an amount to the lender so the lender can give you a lower rate and lower payments early in the mortgage term. The seller may increase the sales price of the home to cover the cost of the buydown. A lender may use a low initial rate to decide whether to approve your loan, based on your ability to afford it.