Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
50% - Moderately


Synonyms:differential, profit margin, surplus
Filed Under: financial-banking, investments, mortgages
Tags: banking, investment, mortgage

Definition of margin

1. The difference between the cost and the selling price of a product or service. Also known as "profit margin."
2. 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.

Related Terms and Acronyms:

  • basis point (BPS)   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   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   A home loan in which the lender charges below-market interest in exchange for discount points.
  • net interest margin (NIM)   Net interest income (the difference between interest income and interest expense) as a percentage of average total assets.
  • participation rate   The rate at which changes in a stock index affect the profit credited to an annuity.
  • spread   The difference between the interest rate charged to borrowers and the interest rate paid to depositors.

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