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Real Estate Terms
 
A B C D E F G H I J K L M

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IDC

Impact Fee
A fee imposed on property developers by municipalities for the new infrastructure that must be built or increased due to new property development. These fees are designed to offset the impact of additional development and residents on the municipality's infrastructure and services, which include the city's water and sewer network, police and fire protection services, schools and libraries. These fees can also be levied against any individual or entity where its actions create an externality within a municipality.

Impound
An account maintained by mortgage companies to collect amounts such as hazard insurance, property taxes, private mortgage insurance and other required payments from the mortgage holders; these payments are necessary to keep the home but are not technically part of the mortgage. Impound accounts are often required of borrowers who put down less than 20%, but are usually optional in other cases. The purpose of the impound account is to protect the lender. Because low down-payment borrowers are considered high risk, the impound account assures the lender that the borrower will not lose the home because of liens or loss, as the lender pays insurance, taxes, etc. from the impound account when they are due.

Income Property
Property bought or developed to earn income through renting, leasing or price appreciation. Income property can be residential or commercial. Residential income property is commonly referred to as "non-owner occupied". A mortgage for a "non-owner occupied" property may carry a higher interest rate than an "owner occupied" mortgage as it is viewed by lenders as a higher risk.

Income Property Mortgage
A loan given to an investor to purchase a residential or commercial rental property. Income property mortgages are typically much harder to qualify for and often require a borrower to include estimates of the rental income that will be received from the property. Unlike owner-occupied and single-family residences, there are few government loan programs to assist in the purchase of income properties. This leaves investors at the mercy of private lenders, who themselves are at the mercy of the credit markets.

Indexed ARM
An adjustable-rate mortgage on which the interest rate adjusts periodically according to an underlying benchmark index plus a margin. An adjustable-rate mortgage contract states which index will be used, how often the interest rate will adjust and usually sets a limit on the maximum amount the interest rate can adjust upward over the life of the mortgage. Some adjustable-rate mortgages also have limits on the amount the interest rate can adjust at each interest rate adjustment date.

Indexed Rate
An interest rate charged on loans to borrowers that is calculated by taking the sum of a benchmark index interest rate and a specified margin. The indexed rate is used to calculate the interest rate on an adjustable-rate mortgage (ARM). The benchmark index rate is a variable rate, while the specified margin remains fixed. On an ARM with an initial fixed interest rate, commonly known as a "hybrid ARM" or "fixed-period ARM", the term "indexed rate" is most often called the "fully indexed rate".

Industrial Park
A portion of a city that is zoned for industrial use (as opposed to residential or commercial use). Industrial parks may contain oil refineries, ports, warehouses, distribution centers, chemical plants, plastics manufacturers, airports, food and beverage processors, and steel manufacturers, to name just a few examples. Some industrial parks offer tax incentives for businesses to locate there, such as tax increment financing.

Initial Interest Rate
The interest rate that is initially assessed on an adjustable-rate mortgage (ARM) and advertised in the origination process. The initial interest rate will be in force for a limited period of time, typically between 12 and 24 months. After this window of time is closed, the interest rate will reset itself to an index plus spread value that is higher than the initial rate. May also be called a "teaser rate".

Initial Rate Period
The period of an introductory or "teaser" interest rate on a mortgage or other loan. The initial rate period varies by loan type and can be as short as one month or as long as several years. Some loans, such as 2-1 or 3-2-1 buydown mortgages, have initial rate periods during which the interest rate increases incrementally.

Inspection Fees
usually paid by the buyer[citation needed] (although occasionally by the seller), charged by licensed home, pest, or other inspectors. Some lenders require inspections (such as termite inspection) to verify that the property is in good condition, which is necessary to assure that the property will retain the necessary collateral value to secure the mortgage loan.

Installment Sale
A method of sale that allows for partial deferral of any capital gain to future taxation years. Installment sales require the buyer to make regular payments, or installments, on an annual basis, plus interest if installment payments are to be made in subsequent taxation years.

Interest Cost
The cumulative sum of the amount of interest paid on a loan by a borrower. This amount should include any points paid to reduce the interest rate on a loan, since points are in effect pre-paid interest. Additionally, any negative points or rebates paid by a lender to a borrower should be subtracted from the interest cost as they are in effect a refund of future interest the borrower will pay on the loan.

Interest Due
The portion of a current mortgage payment that is comprised of interest on the remaining principal amount. In a standard amortizing mortgage, the first payments will go mainly toward interest due, with only a small percentage of the payment going toward reducing the principal amount. When the next monthly payment comes around, the interest due will be calculated on the updated principal amount, which will have decreased slightly from the prior month's payment. As time progresses, the interest due each month should fall as a percentage of the monthly payment, with more money going toward reducing the principal.

Interest Only (IO) Strips
The interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments. The periodic payments of several bonds can be "stripped" to form synthetic zero-coupon bonds. Also, an IO strip might be part of a larger collateralized mortgage obligation (CMO), asset-backed security (ABS) or collateralized debt obligation (CDO) structure.

Interest Rate Cap Structure
Limits to the interest rate on an adjustable-rate loan - frequently associated with a mortgage. There are several different types of interest rate cap structures including an initial, periodic and lifetime interest rate cap structure. The initial cap is a value that limits by what amount the interest can adjust at the mortgage s first interest rate adjustment date. The period cap is a value that limits by what amount the interest rate can adjust at each subsequent adjustment date. The lifetime cap limits the total amount by which the interest rate can adjust over the life of the mortgage.

Interest Rate Ceiling
The maximum interest rate that a financial institution can charge a borrower for an adjustable rate mortgage or loan according to the contractual terms of the mortgage or loan. This interest rate is expressed as an absolute percentage.

Interest-Only ARM
An adjustable-rate mortgage (ARM) with an initial interest-only payment period. During the interest-only period, only the calculated interest must be paid; no principal must be repaid. The length of the interest-only period varies with each mortgage type. After the interest-only period, the mortgage must amortize so that the mortgage will be paid off by the end of its original term. This means that monthly payments must increase substantially after the initial interest-only period lapses.

Investment Farm
A farm owned solely for investment purposes.

Investment Property
A real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rent (income), the future resale of the property, or both. An investment property can be a long-term endeavor, such as an apartment building, or an intended short-term investment in the case of flipping (where a property is bought, remodeled or renovated, and sold at a profit).

Investment Real Estate
Real estate that generates income or is otherwise intended for investment purposes rather than as a primary residence. It is common for investors to own multiple pieces of real estate, one of which serves as a primary residence, while the others are used to generate rental income and profits through price appreciation. The tax implications for investment real estate are often different than those for residential real estate.

Involuntary Foreclosure
When a borrower defaults on a home mortgage loan and the lender initiates proceedings to take possession of the house and sell it to recover the debt. In an involuntary foreclosure, the borrower typically remains liable for the full amount of the debt. If the house sells for less than the amount the borrower owed on the mortgage, the borrower may still be required to pay the remaining balance.

 

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