Margin

Definition

  • The difference between the cost and the selling price of a product or service. Also known as "profit margin."
  • The amount (expressed as percentage points) that a lender adds to an index to arrive at the final interest rate. For example, if the index is 7 percent and the margin 2.75 percent, the final interest rate is 9.75 percent.

Synonyms
differential, surplus, profit margin

Alternate Spellings
profit margin

Related Terms and Acronyms

  • Basis Point (BPS) Acronym, Very Important,
    • A unit of measure: 1/100th of one percent. For example, the difference between a 9.0% loan and a 9.5% loan is 50 basis points.
    Used by mortgage brokers and lenders when discussing mortgage rates and determining commissions.
  • Buy-down Definition,
    • When a borrower or a mortgage broker "buys down" a mortgage rate, they make an upfront payment to the lender in order to lower the mortgage rate. A similar effect can be achieved by making a lump sum payment at the beginning of a mortgage term.
  • Buy-down Mortgage Definition, Important,
    • A home loan in which the lender charges below-market interest in exchange for discount points.
  • Net Interest Margin (NIM) Acronym,
    • Net interest income (the difference between interest income and interest expense) as a percentage of average total assets.
  • Participation Rate Definition,
    • The rate at which changes in a stock index affect the profit credited to an annuity.
  • Spread Definition,
    • The difference between the interest rate charged to borrowers and the interest rate paid to depositors.
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