Definition of "Margin"
In commerce and business, margin as a general term is defined as by the difference between the amount of money spent on a product and the selling price of it. The margin usually appears as a percentage of net sales revenues. For example, a retail store pays $5 for supplier goods and sells them for $10. This means that the margin of sales is 50% on these products.
Margin in financial accounting has a slightly different meaning. In accounting, there are three income statements that appear as a percentage of sales revenue. Gross margin, net profit margins, operating margin used by companies to measure earning performances.
Margin as far as investment goes is a measurement that indicated a change between the purchase price and the selling price of an asset. This creates leverage which means that the investor has gain or loss margins based on the value of the asset at the time of selling compared to the time of buying.
Margin in real estate
Let’s explain the meaning of margin In real estate, the term margin is tied to adjustable-rate mortgages(ARM). The ARM allows borrowers to pay a fixed interest rate for a determined period of time, after which it changes. At the time of the loan approval, a margin is set. As explained before it is a percentage and it determines the maximum interest rate that the borrower can set for the entire duration of the loan.
This means that the interest rate cannot be higher than the index of interest rates plus the margin. The index of interest rates is like a benchmark or a guide for lenders that helps them set interest rates. For example, if the margin is set at 3 percent, it means that your interest rate charges for your loan can only go as high as 3 percent above the index of interest rates.
Popular Real Estate Terms
Assemblage in real estate is the process of combining multiple small plots of land into one larger plot. This is accompanied by plottage, which is the increase in value that occurs when ...
An upper limit on the interest rate that can be charged in a variable rate mortgage over its life. For example, a variable rate loan is initially offered at 7% loan rate, and its interest ...
Looking for an amortization definition? Amortization is an accounting term that basically means something like “reducing the gap between what is owed”. Here’s the play by ...
An individual, educated, trained, and licensed in the principles of designing structures, and rendering drawings, specifications, bidding requirements. ...
Those factors causing the movement of people, industry, and business from the central city to the outside central city areas, suburbs, and/or small cities. Elements of the dispersing force ...
Another residence in addition to the main residence where a person or family resides. An example is a second home out of the city used on weekends and during vacations. Interest and real ...
Lien which is over and above a first lien. A second lien is subordinate to the first lien and can be satisfied only after the initial lien is satisfied. ...
Projecting structure or part of a building. For example, a home was built with balconies jutting out from the sides of the building or a large rock formation constructed out into the ocean ...
An obligation of the owner of property that is recorded with his permission such as a mortgage. Encumbrance on property without being objected to by the owner. ...
Comments for Margin
can you explain the definition f margin in a much more simpler way
Mar 08, 2020 11:56:56Hello Jared,
Thank you for reaching out to us. At your notification, we have updated the glossary term. Feel free to read the new changes and get informed.
Mar 26, 2020 14:04:37Have a question or comment?
We're here to help.