Impound (or reserves)
A 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 borrowers monthly payments designated for future payments of taxes and insurance. (Required by certain lenders or with certain types of financing.)

A published rate used by lenders to calculate interest adjustments on ARMs (Index + Margin = Interest Rate). Some indexes are more volatile than others.

Index (ARM)
Established at loan origination, the index is a widely published financial indicator that, combined with the Margin, works to establish the effective rate of an adjustable-rate mortgage (“Index + Margin = Rate”).

Initial rate
The rate charged during the first interval of an ARM.

Condition of a person who is unable to pay his debts as they fall due.

Charge paid for borrowing money, calculated as a percentage of the amount borrowed.

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

Interest rate cap
A safeguard built into ARMs to prevent drastic changes in interest rates.

Interest rate change date
Dates upon which the rate of interest is subject to change. Initial change date and subsequent change dates may feature different terms.