I

Index
The index is a benchmark rate used by lenders to set adjustable rate mortgage (ARM) interest rates. It is determined by market forces and published by a neutral third party. For example, the London Interbank Offered Rate, or LIBOR, is managed by the ICE Benchmark Administration (IBA), and is based on five currencies: U.S. dollar (USD), Euro (EUR), pound sterling (GBP), Japanese yen (JPY) and Swiss franc (CHF). When setting ARM rates, mortgage lenders add the index to a margin, which is defined in the loan’s documents and agreed to by the lender and borrower.
Initial Interest Rate
The interest rate that applies on the first day of a loan’s term. It may also be called a start rate, an introductory rate, a promotional rate, or a teaser rate. At some point during the loan’s lifetime, this rate may adjust or reset.
Installment Loan
An installment loan is any type of loan that is paid back to the lender within a set period of time, such as five years.
Interest
Interest is the cost of borrowing money.
Interest Cost
The dollar amount of interest paid over the life of a loan.
Interest Due
Interest due is the amount of money required to cover the interest cost for that payment period. Also referred to as “accrued interest.”
Interest Rate
The percentage of a loan amount that it costs to borrow money.
Interest Rate Adjustment Period
The amount of time between interest rate adjustments of adjustable rate mortgages (ARMs).
Interest Rate Ceiling
This is also referred to as a lifetime cap. It’s the highest interest rate that an adjustable rate mortgage can go over its entire term.
Interest Rate Decrease Cap
An interest rate decrease cap is the most your interest rate can drop on an adjustable rate mortgage.
Interest Rate Floor
An interest rate floor is the minimum interest rate possible for anadjustable rate mortgage.
Interest Rate Increase Cap
An interest rate increase cap limits the amount an ARM rate can rise during one adjustment period.
Interest Rate Index
The index is a published benchmark rate used by lenders to set adjustable rate mortgage (ARM) interest rates.
Intro Period
The intro period, also called the introductory period or initial rate period, is the time from the day an account is opened, when a promotional interest rate or other favorable term applies, until the promotion expires.
Intro Rate
A favorable interest rate that applies during a special promotion. The period of time from the day an account is opened until the promotion expires is called the intro period. When the intro period expires, the interest rate may increase.

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