Understanding the terminology used in the home buying and refinancing process is not always easy. There are many mortgage-related words and phrases that may cause confusion.
Our Glossary provides a comprehensive list of mortgage terminology to help you.
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I
illustration
- example of the monthly cost of a mortgage and other expenses associated with the loan such as set-up costs.
incentive
- inducements such as cashbacks offered to borrowers to persuade them to take out a loan with a lender.
Individual Saving Accounts (ISA)
- ISAs are investments in the stock market in a tax efficient way. Using an ISA to pay off a mortgage could make a lot of sense but caution must be used as investing in the stock market involves risk. One of the benefits of ISAs is any profits are free of capital gains (CGT) and income tax and could work out much cheaper than an endowment mortgage.
see our ISA best buy table
individual voluntary arrangement (IVA) - view our IVA advice guide
- introduced under the Insolvency Act 1986 with the intention of allowing an individual to avoid bankruptcy and make maximum possible restitution to creditors. An IVA is seen as preferable to bankruptcy as the debtor can retain his tools of trade and, in the case of a professional person, continue to practice, or hold company directorships. IVAs can be set up for either a person or a company. An Insolvency Practitioner petitions the High Court for protection for a borrower debtor under an IVA. A proposal is put to the creditors of whom 75% must accept. If this is achieved, the arrangement becomes binding upon debtor and all creditors named in the agreement. If the debtor fails to meet payments under an IVA the Insolvency Practitioner is likely to petition for the individual to be made bankrupt. Whilst bankruptcy normally lasts for only three years some creditors insist that IVAs last a longer period.
initial interest
- the payment of interest to cover the period between the date of completion and the normal date from which an interest payment is due. For example if mortgage payments are normally due on the 30th of a month and the loan completes on 14th March, the first monthly payment may be due one month from 30th March, on 30th April. Any interest due for the period from completion until 29th March will be due with the initial mortgage payment. Thus, the borrower's first mortgage payment will normally comprise one full month's payment plus the initial interest.
initial rate
- interest rate that is payable from the commencement of the loan. Many mortgage products, e.g. fixed and discount, have an initial rate of interest which will change at the end of the initial period.
interest only
- interest only mortgage - loan for which only payments of interest are paid to the lender during the term of the loan. All mortgages other than capital and interest repayment loans are a form of interest only loan. Some lenders will allow loans to be set up without any specific provision to repay the capital at the end of the period this is known as a pure interest only loan.
introducer
- person who introduces a loan to a lender.
investment income
- income received from investments. This could be from rental income on investment property, dividends on equities or interest on deposits with financial institutions.
irregular earned income
- additional income over basic salary that is of an erratic nature; additional payments to which the employee may be entitled but which are not received on a regular basis.
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