Mortgage Glossary

Income Property

Real estate developed or purchased to produce income, such as a rental unit.

Index

A number used to compute the interest rate for an adjustable-rate mortgage (ARM). The index is generally a published number or percentage, such as the average interest rate or yield on U.S. Treasury bills. A margin is added to the index to determine the interest rate that will be charged on the ARM. This interest rate is subject to any caps on the maximum or minimum interest rate that may be charged on the mortgage, stated in the note.

Initial Interest Rate

The original interest rate for an adjustable-rate mortgage (ARM). Sometimes known as the "start rate."

Installment

The regular periodic payment that a borrower agrees to make to a lender.

Installment Debt

A loan that is repaid in accordance with a schedule of payments for a specified term (such as an automobile loan).

Interest

The fee charged for borrowing money, usually expressed as an annual percentage of the principal.

Interest Accrual Rate

The percentage rate at which interest accumulates or increases on a mortgage loan.

Interest Rate Cap

For an adjustable-rate mortgage, a limitation on the amount the interest rate can change per adjustment or over the lifetime of the loan, as stated in the note.

Interest Rate Ceiling

For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest Rate Floor

For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Investment Property

A property purchased to generate rental income, tax benefits, or profitable resale rather than to serve as the borrower's primary residence. Contrast with "second home."