Glossary of Terms

Following are mortgage and real estate related terms and definitions you may find helpful.

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Income property: Real estate developed or improved to produce income.

Index: The published index of interest rates used to calculate the interest rate for an ARM. The index is usually an average of the interest rates on a particular type of security such as the LIBOR.

(Also called "Rate Index"). A regularly published rate, independent of the lending institution, that measures the prevailing cost of funds, and is used periodically with the margin to set AML accrual rates.

Individual Retirement Account (IRA): A tax-deferred plan that can help you build a retirement nest egg.

Inflation: An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less. In other words, an increase in prices.

Initial Borrower Interest Rate: The rate on which the borrower's first payment is calculated.

Initial Borrower Payment Rate: The annual interest rate used to calculate the borrower's initial cash payment.

Initial interest rate: The original interest rate of the mortgage at the time of closing.

Installment: The regular periodic payment that a borrower agrees to make to a lender.

Installment loan: Borrowed money that is repaid in equal payments, known as installments. A furniture or automobile loan is often paid for as an installment loan.

Insurable title: A property title that a title insurance company agrees to insure against defects and disputes.

Insurance: A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance binder: A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured mortgage: A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Inquiry: A request for a copy of your credit report. An inquiry occurs every time you fill out a credit application and/or request more credit. Too many inquiries on a credit report can hurt your credit score.

Interest: The cost you pay to borrow money. It is the payment you make to a lender for the money it has loaned to you. Interest is usually expressed as a percentage of the amount borrowed.

Interest accrual rate: The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations.

Interest Rate: The percentage of an amount of money, which is paid for its use for a specified time.

Interest Rate Cap: A provision of an ARM limiting how much interest rates may increase per adjustment period.

Interest rate ceiling: For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest rate floor: For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Investment property: A property that is not occupied by the owner.

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