Glossary of Mortgage Terms

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interest rate

The simple interest rate, stated as a percentage, charged by a lender on the principal amount of borrowed money. See also: Annual Percentage Rate.

interest cap

See: cap.

interest

The amount of the entire mortgage loan which does not include the principal. Also, as a part of PITI, the amount of the monthly mortgage payment which does not include the principal, taxes, and insurance.

insurance

As a part of PITI, the amount of the monthly mortgage payment that does not include the principal, interest, and taxes. Also see: homeowners insurance.

index

A published interest rate compiled from other indicators such as U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan organizations. Mortgage lenders use the index figure to establish rates on adjustable rate mortgages (ARMs).

income-to-debt ratio

See: debt-to-income ratio.

income approach to value

A method used by real estate appraisers to predict a property's anticipated future income. Income property includes shopping centers, hotels, motels, restaurants, apartment buildings, office space and so forth.