Index A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).

Interest rate The percentage of a loan balance which you will pay each year. For example, an 8% (eight percent) (.08) means that you will pay $8,000 interest on a mortgage loan that had an average balance of $100,000 for the year ($100,000.00 x .08)

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