Glossary of Terms
Mortgage. Real Estate & Insurance
- Number derived from a formula to characterize a set of data, which serves as an indicator for determining interest rate changes on ARMs/GPARMs. For any specific interest rate change date, the index will be the value that is most recently available 45 days prior to that date (for our standard plans. FHA ARMs and some negotiated ARM plans may specify a different number of days.)
- Initial Interest Rate
- Original interest rate of the mortgage when it is closed. This rate changes for adjustable-rate mortgages.
- INTEREST BEARING
- A form of interest calculation in which the loan is charged at a daily or monthly rate on the current outstanding balance.
- INTEREST RATE
- Percentage paid for the use of money, usually expressed as an annual percentage.
- Interest Rate Buydown Plan
- Arrangement in which the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specific period, the mortgagor's effective interest rate is "bought down" below the actual mortgage interest rate.
- Interest Reserves
- A reserve account that holds an estimated interest amount that will be due on the loan during the construction phase of an OTC loan. Most Lenders will advance the interest due as necessary from this account to pay the monthly-accrued interest. Any funds remaining in this account at the completion of construction will be applied to the permanent loan as a principal reduction with new P&I.
Calculation: Loan Amount x Interest Rate x 60%/ 12 x Construction Term.
- INVESTMENT PROPERTY
- Property used for investment purposes.