The amount a lender adds to the index on an adjustable rate mortgage to establish the adjusted interest rate. Margin is constant throughout the life of the loan.
INDEX + MARGIN = FULLY INDEXED RATE
Example using the 1 Year Treasury:
1 Year Treasury Index = 4.170
Loan Margin = 2.50
4.170 (Index) + 2.50 (Margin) = 6.67% (Fully Indexed Rate)
Since lenders round the rate to the nearest 1/8%, the actual rate would be 6.625%.