Mortgage Glossary

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Having inadequate cash to meet current obligations. Real property is considered an illiquid investment because of the time and effort required to convert it to cash.
Implied Agency
Form of agency that occurs when the words and actions of the parties indicate that there is an agency relationship.
Implied Contract
A contract created by actions, but not necessarily written or spoken.
Impound Account
An impound account is an account established by the lender to pay a borrower's tax and insurance costs. The borrower's monthly mortgage payment is then increased to cover these costs, with the additional amount being held in the impound account and disbursed by the lender when the payments are due. Lenders typically prefer this arrangement because it reduces the possibility of a lapse in tax or insurance payments that could diminish the value of the lender's investment (your house). Therefore, while it is often possible to opt out of an impound account it will result in additional charges.
Income Property
Real estate developed and improved to produce steady income.
A published interest rate to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. Some commonly used indices include the 1 Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).
Index of Leading Indicators
An index of eleven indicators designed to forecast the strength of the economy six to nine months in the future. Frequency: monthly. Source: Commerce Department.
Individual Retirement Account
A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.
Industrial Production
A fixed-weight measure of physical output of the nation's factories, mines and utilities. Monthly percent changes in the index reflect the rate of change in output. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. Frequency: monthly. Source: Federal Reserve.
In-file Credit Report
A computer-generated report containing credit and legal information obtained from one of the main credit bureaus.
An increase in the amount of money or credit available relative to the amount of goods or services available. Inflation causes an increase in the general price level of goods and services. Over prolonged periods, inflation can reduce the purchasing power of a dollar, making it worth less.
Initial Interest Rate
The original, starting interest rate of a loan at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes called a teaser rate
A regularly scheduled periodic payment that a borrower agrees to make to a lender.
Installment Loan
Borrowed money that is repaid in equal periodic payments. Cars and furniture are often paid for with installment loans.
Insurable Title
A property title that a title insurance company agrees to insure against defects and claims.
A form of contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. The periodic payments are known as insurance premiums.
Insurance Binder
A document stating that insurance is only temporarily in effect. Because the coverage will expire by a certain date, a permanent policy must be obtained prior to the expiration date.
Insured Mortgage
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.
The cost of the use of money.
Interest Accrual Rate
The rate at which interest accrues on a mortgage. Usually, it is also the rate used to calculate the monthly payments.
Interest Rate
Interest Rate Buy-down Plan
An arrangement where the property seller, borrower or other party deposits money to an account so that it can be released each month to reduce the borrower's interest rate or monthly payments during a specified period of a loan.
Interest Rate Ceiling
The maximum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.
Interest Rate Floor
The minimum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.
Interest-Only Loan Option
Loan payments have two components, principal and interest. An interest-only loan has no principal component for a specified period of time. These special loans minimize your monthly payments by eliminating the need to pay down your balance during the interest-only period, giving you greater cash flow control and/or increased purchasing power.
Investment Property
A property that is not occupied by the owner.