In real estate finance, Indexing refers to adjusting a mortgage’s interest rate, payment amount, or loan terms based on changes in an established economic index. Common indexes include measures of inflation or published interest rate benchmarks.
Indexing is most often associated with adjustable rate mortgages, where loan payments change periodically in response to market conditions. This method allows lenders to align loan returns with economic trends while informing borrowers that loan costs may increase or decrease over time.
