Fully Indexed Interest Rate

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Dictionary Says

Definition of 'Fully Indexed Interest Rate'

The interest rate on an adjustable-rate loan that is calculated by adding the margin to an index level. The interest rate on an adjustable (sometimes known as variable) rate loan is tied to a benchmark interest rate, known as an index. Popular indexes for loans are: the prime rate, LIBOR, and various U.S. Treasury bill and note rates. When calculating the fully indexed interest rate, the index level varies according to market conditions but the margin is usually a constant value.
Investopedia Says

Investopedia explains 'Fully Indexed Interest Rate'

For example, the fully indexed interest rate on an adjustable rate mortgage tied to the six-month LIBOR index with a margin of 3% would be 10% if the six-month LIBOR index were at 7%. If the six-month LIBOR index were to adjust upwards to 8%, the new fully indexed interest rate would be 11%.

For some loans, the borrower may have the option of choosing between two or more indexes to which their loan will be tied. Most popular indexes are highly correlated with each other. In general, the lower the level of an index relative to other indexes, the higher the margin on the loan. However, the margin is frequently negotiable with the lender. The choice of the index and the margin, both of which are frequently overlooked by borrowers, can make a big difference over the life of an adjustable rate loan.
Search results for

'Fully Indexed Interest Rate'

  • How Interest Rates Affect The Housing Market

    http://www.investopedia.com/articles/pf/07/mortgage_rate.asp
    ... margin. This is known as the fully indexed interest rate. ... 9.83%. If the index
    dropped to 6.1%, the fully indexed interest rate would be 9.1%. ...

  • Subprime Is Often Subpar

    http://www.investopedia.com/articles/pf/07/subprime.asp
    ... The index value plus the margin is known as the fully indexed interest rate. For
    example, 2/28 ARMs are frequently tied to the six-month LIBOR index. ...

  • Choose Your Monthly Mortgage Payments

    http://www.investopedia.com/articles/pf/07/mortgage-payments.asp
    ... the five-year fixed-rate period, not only will the interest rate start to adjust
    according to an index plus a margin (the fully indexed interest rate), but the ...

  • Payment Option ARMs: A Ticking Time Bomb?

    http://www.investopedia.com/articles/mortgages-real-estate/08/payment-option-ARM.asp
    ... When a POA "recasts" at the beginning of year six, the minimum payment is recalculated
    based on the fully indexed interest rate; the result is a substantial ...

  • Make A Risk-Based Mortgage Decision

    http://www.investopedia.com/articles/pf/07/mortgage_decision.asp
    ... It is the result of the expiration of a temporary start rate or fixed-interest rate
    period, an increasing fully indexed interest rate, the end of an interest ...

  • This ARM Has Teeth

    http://www.investopedia.com/articles/pf/07/arm-reset.asp
    ... to a level where it now begins to pay off the principal as well as the interest
    over the ... But, the fully amortized payment at the loan's indexed rate of, say ...

  • Curbing The Effects Of Inflation

    http://www.investopedia.com/articles/05/061605.asp
    ... come out ahead when compared to fully taxable bonds ... face value and grow with
    inflation-indexed earnings for ... since IPSs typically pay lower interest rates than ...

  • CFA Level 1 Study Guide - Quantitative Methods - Net Present Value ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/discounted-cash-flow-npv-irr.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a ... 9.14
    Implications Of Debt Issuance; 9.15 Effect Of Changing Interest Rate On Debt ...

  • CFA Level 1 Study Guide - Liabilities - Types Of Off-Balance-Sheet ...

    http://www.investopedia.com/exam-guide/cfa-level-1/liabilities/off-balance-sheet-financing-types.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a ... 9.14
    Implications Of Debt Issuance; 9.15 Effect Of Changing Interest Rate On Debt ...

  • CFA Level 1 Study Guide - Derivatives - Swap Markets and Contracts ...

    http://www.investopedia.com/exam-guide/cfa-level-1/derivatives/swap-markets-contracts.asp
    ... 7.13 Dilutive Securities; 7.14 Calculating Basic and Fully Diluted EPS in a ... 9.14
    Implications Of Debt Issuance; 9.15 Effect Of Changing Interest Rate On Debt ...

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