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Index

Index

In mortgage terminology, an index is a published interest rate that is used as a standard by which changes to an adjustable rate mortgage (ARM) are determined.  When the time comes for an ARM to adjust, the index to which the mortgage was tied is reviewed. The current rate of the index is used to determine the new rate, by adding the index rate to the margin that is specified in the loan. The LIBOR is an example of a common index used by mortgage lenders.

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