Impound (Reserves)
Portion of a borrower’s monthly payments held by the lender to pay for taxes, insurance and other items as they become due.
Impound Account
Savings account for accumulating that portion of a borrower’s monthly payments designated for future payments of taxes and insurance. This is required by lenders for certain types of financing.
Index
A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.
Initial Rate
The rate charged during the first interval of an ARM.
Insolvency
Condition of a person unable to pay debts as they fall due.
Interest
Charge paid for borrowing money
Interest Rate
The periodic charge, generally expressed as a percentage per annum of the outstanding balance, for use of credit.
Interest Rate Cap
A safeguard built into ARMs to prevent drastic changes in interest rates.