General Mortgage Knowledge · 20% of the SAFE exameasy
Correct answer: A fixed percentage set by the lender that is added to the index to determine the interest rate
The margin is a fixed amount determined by the lender at loan origination that remains constant for the entire life of the ARM. It is added to the current value of the index to produce the fully indexed rate. "A fixed percentage set by the lender that is added t..." describes the index (not the margin). "A variable rate that changes based on current market..." describes the initial discount or teaser rate concept. "The maximum amount the interest rate can increase in..." describes the periodic cap.
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