Bankrate's financial glossary
Did you run across an unfamiliar term when applying for a mortgage, credit card
or auto loan? Find the meaning here, along with definitions of other financial words
and phrases, in Bankrate.com's financial glossary.
A published measure of the cost of money that lenders use to calculate the rate on an adjustable rate mortgage (ARM). The most common indexes are the one-year Treasury Constant Maturity Yield and the FHLB 11th District Cost of Funds.
The sum of the published index plus the margin. For example, if the index were 9 percent and the margin 2.75 percent, the indexed rate would be 11.75 percent. Often, lenders charge less than the indexed rate the first year of an adjustable rate mortgage (ARM).
Interest tax deduction
Most mortgage holders can deduct all the interest paid on the loan in filing income tax. The deduction applies to people with just one mortgage on a primary residence, as well as those with a combination of loans. Within certain limits set by the IRS, points paid up front on a mortgage are usually deductible in the year the house was purchased.
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Money that local government collects from housing developers to pay for services that residents will need, such as schools, parks, road improvements and sewerage.
An account in which money for property taxes and insurance is held until paid; money is added to the account every time a mortgage payment is made.
Money that is placed in an escrow account to pay for property taxes and insurance.
Incentive stock options
Stock options that will receive favorable tax treatment if the employee holds the shares for at least one year before selling.