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| Impound Account |
An impound account, also called an escrow account, is an account that is set up for you by your home loan lender and is used to pay expenses like hazard insurance, mortgage insurance and property taxes. The money that you put into this account goes to pay for these expenses. While it is possible to opt out of an impound account, it may result in additional charges. |
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| Index |
An index is a measurement that is used to determine the interest rate of your adjustable rate mortgage. This measurement is usually based on the current rates of U.S. Treasury Securities. At the time of your mortgage adjustment, the index will be used in combination with a margin to determine what your new interest rate will be. |
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| Initial Interest Rate |
Sometimes referred to as a teaser rate, this is the beginning interest rate that your adjustable-rate mortgage starts with the day your loan is approved. This rate will be fixed for a certain period of time, but your rate will then adjust according to the index and margin that your lender uses. |
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| Installment Loan |
A loan that has predetermined, equal payments due until the loan has been paid in full. |
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| Insurable Title |
A property title in which a title insurance company is willing to insure against certain legal disputes, claims and liens. |
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| Insured Mortgage |
A mortgage that is insured to protect the lender against loss if you were to default on your loan. Loans are insured by the FHA, VA or a private mortgage insurance policy (PMI). |
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| Interest Cap |
When your adjustable-rate mortgage has an interest cap, it means there is a limit as to the amount that your interest rate can go up or down. Interest caps usually fall into one of two categories. A lifetime cap is a limit on the amount that the interest rate can change over the life of the loan and periodic caps are limits to the amount that your interest rate can change at each adjustment period. Sometimes there is a third category of caps, called payment caps. These caps limit the amount that your mortgage payment can go up, but they are not common and should be avoided since they can result in a negative amortization of your mortgage. |
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| Interest Rate |
The percentage yearly cost to borrow money. When you invest money, the interest rate is the money that you make from your investment. The interest rates on loans can be fixed or adjustable, meaning that the interest can stay the same throughout the term of the loan or can go up or down according to an index. |
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| Interest Rate Adjustments |
The amount of basis points that your variable-rate loan changes on your adjustment date. Each percentage point equals 100 basis points. Generally, your interest rate will only be adjusted once each year and the change will usually be based on the index and margin that are used by your lender. |
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| Interest Rate Buydown Plan |
A loan instrument where money is deposited into an account so that it can be used to reduce a monthly mortgage payment during the buydown period of a mortgage. While the buydown is normally funded by the seller, it can also be funded by a lender or even the buyer. |
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| Interest Rate Cap |
The limit as to how much the interest rate of an adjustable rate mortgage can go up or down. You will encounter two types of interest rate caps. A lifetime cap, also referred to as a ceiling or a floor, is required by law and is the limit that is applied to the amount that your interest rate can go up or down over the life of your mortgage. Periodic caps are the limits that are applied to the amount your interest rate can change from one adjustment period to the next. |
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| Interest Rate Ceiling |
An interest rate ceiling, also called a lifetime cap, is the maximum interest that you can be charged on your adjustable rate mortgage. The interest rate ceiling will be specified in the terms of your mortgage. |
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| Interest Rate Floor |
The maximum amount that an adjustable-rate mortgage (ARM) can decrease over the life of a loan. |
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| Interest Rate Lock |
When a lender guarantees to loan you money at a set interest rate, protecting you from potential rate increases. Rate locks are for a set period of time, usually not longer than 30 days, so you will want to make sure to close on your loan before the rate lock expires. A lender will normally charge you a fee to lock in an interest rate. |
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| Introductory Rate |
Also called a teaser rate, this is the interest rate that you will pay at the beginning of your adjustable-rate mortgage. This rate will stay fixed for a set period of time, usually for one year, and will then adjust according to the index that your lender uses in addition to the margin that they add. |
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| Invoice Price |
Also known as the dealer invoice, this is the base price that a dealer is charged for a vehicle. It is important to remember that the invoice price does not always reflect the actual cost of the vehicle to the dealer and that it is possible to purchase a car below dealer invoice. |
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