What is Fully Indexed Rate?
The fully indexed rate is the interest rate on an adjustable-rate mortgage calculated by adding the current index value to the lender's margin.
The fully indexed rate represents what your adjustable mortgage rate would be if it adjusted today, based on the current index plus the margin. Borrowers see it in the loan estimate and note as a reference point for potential future payments. It is not necessarily the rate you will pay after the initial period, because caps and the actual index at adjustment time apply. Watch for how the lender calculates the index and whether the fully indexed rate is used for qualification purposes. A higher fully indexed rate can affect your debt-to-income ratio and how much you can borrow, so compare it across loan offers.
Written by Ralo's editorial automation and checked against the site's copy rules.