Home Loan Glossary – I

Income property: Income property is a piece of property that is developed, renovated or upgraded in order to generate income, usually through rentals.
Index: An index is a published and widely-used statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. A mark-up or margin is added to the index to calculate the interest rate for an adjustable rate home loan or mortgage (ARM). Among the common indices are; the Prime, LIBOR, MTA, and COFI rates.
In-File Credit Report: In-file credit reports are usually computer-generated, and contain financial or credit information about prospective borrowers from one or more credit bureaus.
Inflation: Inflation refers to a general increase in prices, measured against average consumer buying power. This increase has the effect of raising the general price of goods, services and the cost of living. Over time, inflation reduces the purchasing power of a country's currency. This lessens the worth of the currency, and decreases consumer buying power.
Initial Draw Amount: The initial draw amount refers to the amount of the line of credit (home equity based) that a borrower requests in cash at closing. This amount is limited by how much home equity the borrower has access to.
Initial Interest Rate: The initial interest rate is typically a below-market interest rate that is effective for the first few months or years of a variable-rate home equity line of credit, or an adjustable-rate mortgage loan (ARM). At the end of this initial period, the interest rate adjusts from time to time during the rest of the loan's life. These rate changes depend on changes in the financial index used. The initial interest rate is also called the start rate, intro rate or teaser rate.
Instalment Loan: This is a type of loan that consists of a lump sum repaid in equal instalments known as loan payments. For example, an auto loan is frequently paid in instalments. Contrast with a Line of Credit or Revolving Liability.
Insurable Title: An insurable title is one that a title insurance company is willing to insure against defects, damage and disputes. A typical condition for the sale of property is that the buyer must get an insurable title, otherwise he or she is not obligated to buy the real estate.
Insurance: Insurance, also referred to as an insurance policy, provides protection against specific losses in exchange for periodic payments by or on behalf of the policyholder. These periodic payments are known as insurance premiums. In the event of damage or defect to property or other assets, the insurance contract provides compensation for the losses or damages.
Insurance Binder: An insurance binder is a document that states that insurance is in effect for a specified period of time. It also indicates an expiration date for this coverage, and the date when a new, permanent policy needs to be in place.
Insured Mortgage: An insured mortgage features a contractual agreement that insures the home loan lender against loss resulting from a borrower's default on a government or conventional mortgage. Mortgage insurance can be issued by private firms or government agencies, such as the Federal Housing Administration (FHA). The insurance may cover a percentage of the mortgage loan, or nearly all of it, depending on the type of insurance. See Private Mortgage Insurance (PMI).
Interest: This is the cost to borrow money, usually expressed as a percentage of the borrowed amount. To compare interest rates, it's best to look at the Annual Percentage Rate (APR). Interest also refers to the part of a loan payment that goes toward interest expense rather than reducing the principal balance.
Interest Accrual Rate: An interest accrual rate is the percentage rate at which interest grows on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
Interest Payment: The interest payment is the portion of the monthly loan payment that covers the amount of interest on a loan, based on the schedule for amortization. On a home loan, this amount is typically tax-deductible, but consult your tax advisor regarding your situation.
Interest Rate: The interest rate is a percentage-based rate charged for borrowing money. The interest rate is found in the mortgage note of a home loan, and is typically published on the statements of most credit accounts (also see note rate). To compare interest rates, it's best to look at the Annual Percentage Rate (APR). For ARM loans, the interest rate is calculated by adding a mark-up or margin to an index.
Interest Rate Cap: This refers to the maximum interest rate adjustment permitted on an adjustable-rate mortgage loan, either from one adjustment period to another, or over the life of the loan.
Interest Rate Buydown Plan: An interest rate buydown plan enables a borrower to pay a reduced monthly payment, either permanently or during the first few years of a home loan. This is typically initiated by the lender, seller or borrower, who makes an up-front lump sum payment.
Introductory Rate: The introductory rate is typically a below-market interest rate that is effective for the first few months or years of a variable-rate home equity line of credit, or an adjustable-rate mortgage loan (ARM). At the end of this initial period, the interest rate adjusts from time to time during the rest of the loan's life. These rate changes depend on changes in the financial index used. The introductory rate is also called the start rate, initial interest rate, intro rate or teaser rate. Also see initial interest rate.
Investment Property: An investment property is acquired for the purpose of making a profit. The property owner does not live in it, but rather rents it out to a tenant. This generates rental income. Profit can also be generated through property appreciation.