Fully indexed interest rate

Definition

The current index value plus the margin on an ARM.

Usually, initial interest rates on ARMs are below the fully indexed rate.

If the index does not change from its initial level, after the initial rate period ends the interest rate will rise to the fully indexed rate after a period determined by the interest rate increase cap.

For example, if the initial rate is 4% for 1 year, the fully indexed rate 7%, and the rate adjusts every year subject to a 1% rate increase cap, the 7% rate will be reached at the end of the third year

Related Terms

Other terms related to 'Fully indexed interest rate' starting with the letter 'F'

First mortgage, Foreclosure, Financing points, Freddie Mac, Fixed rate mortgage FRM

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