Definition: The external reference rate used with a contractual margin to determine an adjustable-rate mortgage's rate, subject to applicable caps and other terms.
Example
An index of 4% plus a 2.5% margin produces a 6.5% fully indexed rate before applying any relevant limits.
Keep the distinction clear
The index can change; the margin is ordinarily fixed by the loan agreement. The actual payment rate may differ because of caps, introductory terms, or timing.
Related terms
Margin (ARM) · Adjustable-Rate Mortgage (ARM) · Annual Percentage Rate (APR)
Keep studying
Mortgages: Borrower, Lender, Ownership, and Key Clauses
References: California DRE: real estate glossary · CFPB: mortgage key terms
Pronunciation (US): IN-deks RAYT (capitals show stress)
Pronunciation reference: Merriam-Webster
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