Impound Account
An account held by the lender to which the
borrower pays monthly installments, collected as
part of the monthly mortgage payment, for annual
expenses such as taxes and insurance. The lender
disburses impound account funds on behalf of the
borrower when they become due. (Also known as
Escrow Account.)
Index
A published interest rate compiled from other
indicators such as U.S. Treasury bills or the
monthly average interest rate on loans closed by
savings and loan organizations. Mortgage lenders
use the index figure to establish rates on
adjustable rate mortgages (ARMs).
Initial Rate
The rate charged during the first interval of an
ARM loan.
Individual Retirement Account (IRA)
An account that can be established by individuals
who meet IRS qualifications to build retirement
funds, deferring the tax liability until funds are
withdrawn. Under permitted circumstances, they may
deduct their annual contributions from their
taxable income.
Installment Debt
Borrowed money that is repaid in successive
payments, usually at regular intervals.
Interest
Charge paid for borrowing money, calculated as a
percentage of the remaining balance of the amount
borrowed.
Interest Rate
The simple interest rate, stated as a percentage,
charged by a lender on the principal amount of
borrowed money. See also: Annual
Percentage Rate
Interest Rate Cap
Consumer safeguards that limit the amount the
interest rate on an ARM loan can change in an
adjustment interval and/or over the life of the
loan. For example, if your per-period cap is 1%
and your current rate is 7%, then your newly
adjusted rate must fall between 6% and 8%
regardless of actual changes in the index.
Interest Only Loan
A loan with periodic payments of interest only.
The principal amount is due in lump sum(s) upon
maturity or intervals.
