Frost Mortgage Banking Group Glossary of Terms

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, although it is not used for an adjustable rate mortgage (ARM) with payment change limitations.

Interest Rate

The rate of interest in effect for the monthly payment due.

Interest Rate Buydown Plan

An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate.

Interest Rate Ceiling

For an adjustable rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.

Interest Rate Floor

For an adjustable rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.

Investment Property

A property that is not occupied by the owner.

Ira (Individual Retirement Account)

A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.