What is Fully Indexed Rate (FIR)?


The fully indexed rate (FIR) is the actual rate of your adjustable rate mortgage calculated by adding up the ARM index your mortgage is tied to and the lender margin. Most ARM loans are advertised with only the starting rate, especially Option ARMs. Often, the fully indexed rate (FIR) will not be disclosed at all if the borrower does not specifically request it.

How to calculate the fully indexed rate (FIR)?

You should know what ARM index your ARM is tied to. It could be LIBOR, COSI, COFI or MTA - some of the most popular ARM indexes. Take the ARM index, add the lender margin and you will arrive at your adjustable rate mortgage fully indexed rate (FIR).

To identify your fully indexed rate (FIR), ask the lender to provide the ARM index they are using plus their margin, and a source you could use to follow this particular ARM index you will be using. Just make sure the lender points out in writing which particular ARM index they are using as there could be 1-month LIBOR, or 1-year CMT.

Should I know the fully-indexed rate (FIR) on my ARM?

The fully indexed rate (FIR) is important to know if the rate will be adjusted within months, or sooner than the homeowner plans to move out. If the first adjustment occurs after 3 or more years, it may not be as important to know, especially if you are planning to sell or refinance within that time.

There are some ARMs with starting ARM rate of, say, only 1.5%. However, this rate will usually last for no longer than 1 to 3 months, in which case the ARM rate will adjust to the fully indexed rate (FIR) very soon. You should inquire about the FIR, if the initial rate is set suspiciously low in order to avoid quick payment shock.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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