What do you call the interest rate that combines the index and the margin?

The term that refers to the interest rate that combines the index and the margin is known as the Fully Indexed Rate. In the context of adjustable-rate mortgages (ARMs), the index is a benchmark interest rate that reflects current market conditions, while the margin is an additional amount added by the lender to cover their costs and provide profit. By adding the margin to the index, you obtain the Fully Indexed Rate, which is the rate that the borrower will pay when their loan adjusts.

For borrowers, understanding the Fully Indexed Rate is crucial, as it determines their mortgage payments in the future when interest rates change according to the defined adjustments in their loan agreement. This concept is fundamental in risk assessment for both lenders and borrowers as market rates fluctuate. The other terms mentioned do not accurately describe this specific combination of index and margin.