Mortgage Glossary of Terms

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Impound: The portion of a borrower's monthly payments held by the lender to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.

Initial Interest Rate: The interest rate at the start of an adjustable rate mortgage (ARM). It may be lower than the fully indexed rate.

Interest: The amount of money paid by a borrower to a lender for the use of the lender's money for a certain period of time.

Interest Income: The potential income from funds which would have been used for the down payment, closing costs, and any difference between monthly rental payment and monthly mortgage payment.

Interest Rate: The periodic charge for use of credit, expressed as a percentage.

Interest rate swap: A transaction between two parties in which each agrees to exchange payments tied to different interest rates for a specified period of time.

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