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Impound account
or escrow account
An account specifically set up by a lender to hold funds that are
set aside for the payment of property taxes and insurance. These
funds are held in escrow until disbursed on behalf of the borrower
to the appropriate parties.
Index
When used in a note or credit agreement, the measurement used to
decide how much the annual percentage rate will change at the beginning
of each adjustment period. Generally, the index plus margin equals
the new rate that will be charged, subject to any caps. Different
lenders use different index rates (cost of funds index, prime rate
and so forth).
Inflation rate
The increase in price of consumer goods, usually expressed as a
percentage over a specific period of time.
Initial rate
The starting interest rate. Some people call this a teaser rate,
because it gives you low interest and low monthly payments at the
beginning, but may adjust up at the next adjustment period (it will
usually adjust even if the index doesn't go up, since it's lower
than index plus margin for the initial period).
Interest
A charge paid for borrowing money.
Interest-only
payments
Some lenders permit you to pay only the interest due on a loan for
a portion of the loan term, which lowers your periodic payment,
but does not decrease your principal balance on the loan. See balloon
loan and balloon payment.
Interest rate
Cost for the use of a loan, usually expressed as a percentage of
the loan, paid over a specific period of time. The interest rate
does not include fees charged for the loan.
Interest rate
cap
A limit on how much the variable interest rate can increase at any
one time. Many real estate loans have both annual (or semi-annual)
caps and lifetime caps, which limit the amount your payments can
increase in an adjustment period and over the life of the loan.
Investment
property
Property that is purchased to generate rental income, or to be sold
once it's appreciated in value.
Invoice price
The amount that auto manufacturers charge dealers for new cars,
including the options. Also called dealer invoice.
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