Glossary of Terms

• Indemnify

  To make payment for a loss.
  
  
• Initial Rate

  An interest rate charged for the first six or twelve months of an adjustable rate loan. Normally this rate will be lower than prevailing fixed market rates.
  
  
• Interim Financing

  Temporary financing usually for construction or bridge loans to facilitate the purchase of a new home before the sale of the previous home has been closed.
  
  
  
  

• Index

  Used by lenders to calculate the interest adjustments on adjustable rate loans. Some indexes are more volatile than others; this can affect adjustments in the interest rate and, subsequently, the monthly payment. Because these indexes reflect the general movement of interest rates, they tend to keep the rate on an adjustable rate loan in line with market conditions.
  
  
• Interest Rate Cap

  A safeguard built into an adjustable rate loan to protect the consumer against dramatic increases in the rate of interest and, consequently, in the monthly payment. For example, an adjustable rate loan may have a two percentage point limit per year on the amount of increase or decrease, as well as a five percentage point limit (increase or decrease) over the life of the loan.