Quick answer
The margin is the number of percentage points the lender adds to the index to set the rate on an adjustable-rate mortgage after its fixed period. It is written into the loan agreement and doesn’t change after closing.
Key facts
Why the margin outlasts the starting rate
The starting rate lasts a few years; the margin applies at every reset for the rest of the loan. Two ARMs with the same starting rate can cost very different amounts later if their margins differ, and margins vary by lender and loan.
Example: two margins, same start
Two $300,000 5/6 ARMs both start at an example 6.5%, and $280,833 is owed when the fixed period ends. Suppose the index (30-day average SOFR on Fannie Mae loans) is 4.5% at the first reset:
| Margin | New rate | New payment |
|---|---|---|
| 2.75 points | 7.25% | $2,030 |
| 3.25 points | 7.75% | $2,121 |
The higher margin costs $91 a month, or $1,096 a year, at that index level — and the gap returns at every adjustment. Both resets stay under the initial cap in 2/1/5.
Where to find it
The margin is listed with the index in the Adjustable Interest Rate (AIR) table on page 2 of the Loan Estimate. Compare it alongside the rate caps when shopping for an adjustable-rate mortgage; the fixed vs adjustable guide and ARM risks explained walk through the rest.
Sources
- Fannie Mae Selling Guide B2-1.4-02 — Index on Fannie Mae ARMs (Dec 10, 2025)
- Fannie Mae Standard ARM Plan Matrix — Rate caps on a Fannie Mae 5/6 ARM (first/periodic/lifetime) (Oct 1, 2021)
- CFPB: For an ARM, what are the index and margin, and how do they work?
Last reviewed Figures are checked against the sources above. Read our editorial policy. This page is general information, not financial advice — see the disclaimer.