Investment Glossary:

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I

Implied Warranty of Habitability:  A legal doctrine that requires landlords to offer and maintain livable premises for their tenants. If a landlord fails to provide habitable housing, tenants in most states may legally withhold rent or take other measures, including hiring someone to fix the problem or moving out.

Impound:  That portion of a mortgagor's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.  Known as impounds or reserves in some states.

Impound Account:  See Escrow Account.

Improvements:  Additions to raw land such as buildings, streets, sewers, etc. that increase the value of the property.

Incidents of Ownership:  Any control over property. If you give away property but keep an incident of ownership--for example, you give away an apartment building but retain the right to receive rent--then legally, no gift has been made. This distinction can be important if you\'re making large gifts to reduce your eventual estate tax.

Indemnify:  To protect another person against loss or damage.

Index:  The published cost of money that serves as the minimum basis for determining the interest rate for an adjustable rate mortgage. Among the commonly used indices are the Prime Rate (Prime), the London Interbank Offering Rate (LIBOR), the Cost of Funds (COF) and the 1 year Treasury Bill (1 year T). The particular index is generally, though not always, selected based on how often an interest rate is supposed to adjust. Loans which allow monthly interest rate adjustments commonly use the Prime Rate. Loans that adjust semi-annually may use LIBOR. The 1 year Treasury and the Cost of Funds are often used for loans which adjust on an annual basis. There are other Treasury instruments which are used for 3 and 5 year adjustment periods. The interest rate of the loan is determined by adding a margin to the index. The size of the margin is typically a function of the index used and the credit worthiness of the borrower. Typical margins on a Prime Rate based loan would be 0.0 to 5.0 so that if the Prime Rate were 8.25% and the margin were 2.0 (typical for an "average" borrower); the interest rate would be 10.25% (8.25 + 2.0).

Initial Note Rate:  With regard to an adjustable rate mortgage, the note rate upon origination. This rate may differ from the fully indexed note rate.

Installment Contract:  See Contract for Deed.

Installment Sale:  When a seller accepts a mortgage for all or part of the sale, tax on the gain is paid as the mortgage principal is collected.

Insurance Binder:  A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

Insured Mortgage:  A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Inter Vivo:  During one's life.

Interest Accrual Rate:  The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.

Interest Rate:  The percentage of the loan amount charged for borrowing money; i.e., the cost of the money expressed as a percentage.

Interest Rate Buy Down Plan:  A temporary buy down gives a borrower a reduced monthly payment during the first few years of a home loan and is typically paid for in an initial lump sum made by the seller, lender, or borrower. A permanent buy down is paid the same way but reduces the interest rate over the entire life of a home loan.

Interim Financing:  A loan, including a construction loan, used when the property owner is unable or unwilling to arrange permanent financing.

Internal Rate of Return (IRR): A method of determining the annualized effective compounded return rate on an investment over time assuming a set of income, expense, and property value conditions as well as risk.  It combines the present worth of the right to receive future income streams with the present worth of the right to receive a particular profit when the property is sold.

Intestate:  Having made no valid will.