Posted by Larry/Ca on 10/12/06 12:24am
Msg #151891

"margin rate" can someone...

give me a quick explanation as to what this is. had a no-sign tonight because this wasn't right on the note. never had anyone complain about this before.

thanks, Larry

Reply by Larry/Ca on 10/12/06 12:31am
Msg #151892

The rate I pay on my HELOC is the prime plus something. is that the margin?

Reply by Lee/AR on 10/12/06 1:16am
Msg #151896

Yep. n/m

Reply by Larry/Ca on 10/12/06 1:26am
Msg #151899

Will then is rate something that ....

is negotiated, or affected by credit rating. is it consistent with all line-of-credits by a lender or does it differ for each borrower?

Thank you for responding,,,Larry

Reply by ReneeK_MI on 10/12/06 4:48am
Msg #151903

Re: Will then is rate something that ....

The start rates and the margins on ARM loan products will vary according to specific loan products, lenders, borrower's credit ratings, and the 'L/O factor' (meaning the L/O has some discretion to pricing, and pricing is relative to his paycheck).

To put it all in very simple terms - L/O's shop for a product within a matrix, looking for the specific products within that matrix where his borrower 'fits'. He'll then have a selection of various products fitting this borrower - and the tweaking of the precise pricing is at the L/O's discretion, within limits according to the lender's guidelines and applicable laws.

Reply by KJ_CA on 10/12/06 1:16am
Msg #151897

Once the note in an ARM begins to "Adjust" the effective interest rate the borrower will pay will be an index (Prime, COFI, MTA, LIBOR, etc) plus a margin. In your example above the addition to the Prime on a HELOC is the margin.

Reply by PAW on 10/12/06 7:15am
Msg #151919

The margin doesn't change ...

... over the life of the loan. The margin is the amount, expressed as a percentage rate, that the lender charges above the index. Lenders are not allowed to change the margin. The interest rate is then calculated by adding the index (variable rate) and the margin (fixed rate).

For example, if the current index is 4.5% and the loan has a 3.25% margin, the current applicable interest rate would be 4.5+3.25=7.75%.