Illustration

In a mortgage world, illustration refers to the calculation of monthly payments by lenders or mortgage brokers, in order to give borrowers an idea of how much a particular mortgage would cost monthly and long term.

Imports

Goods from other countries sold in Canada.

Impact Fees

Fees charged by local governments to home developers that cover expenses of expanding public services to an area of that property. Public services include public transportation schools, emergency 911 services, sewers, libraries, etc.

Impound Account / Escrow Account

A bank account where money for insurance and taxes is held until paid in full. When you make mortgage payment, part of that payment goes towards taxes and insurance. In order to make it more convenient, this money is deposited to an impound account. Money is held there until it is time to pay the amount due for insurance and taxes.

Impounds

Impounds: money held on an impound account.
Impound Account: A bank account where money for insurance and taxes is held until paid in full. When you make mortgage payment, part of that payment goes towards taxes and insurance. In order to make it more convenient, this money is deposited to an impound account. Money is held there until it is time to pay the amount due for insurance and taxes.

Income Approach

Stage that assesses value of a property. Income approach looks at money that commercial property makes, such as rental apartments, shopping centers, office buildings, etc. It takes annual income of a property and subtracts all expenses: salaries, service fees, maintenance, electricity, taxes, insurance, etc. This is called income approach. 

Income Property

Property built to make income, such as rental apartments, office buildings, shopping malls.

Income Splitting

A technique of paying less taxes on income by passing some of the income to lower tax bracket family members through legal means. For example, a family member making $80.000 will be paying more taxes than a person making $40.000 a year. In order to pay less taxes, higher income earner may “hire” lower income family member and write off taxes as a business expense, meanwhile the “hire” is only symbolical, for taxation purposes.

Income Statement

Statement that calculates company’s or individual’s profits, by subtracting expenses from revenues.

Income Tax

Tax paid on income earned by individuals and companies. Income tax is Federally administered and Canada Revenue Agency is responsible for tax collections. Income tax differs and is calculated using Canadian graduated tax scale. Generally – the more your earn the more taxes you pay.

Inclusionary Zoning

Inclusionary zoning is a city development practice, where government requires developments affordable to lower income families. Inclusionary zoning specifies a number or a percentage of affordable housing in a specific development.

Incurable Defect

Defect which cannot be fixed. Incurable defect may affect the price of real estate property.

Indefeasible

Something that cannot be undone, revoked, changed, defeated or made void.

Independent Bank / Community Bank

A locally owned bank, which is not owned by bigger bank holding company. Independent bank lends and makes money only in its local community. Independent bank is also referred to as a community bank.

Index

In mortgage context index refers to the interest rate from which the rate for an adjustable rate mortgage is calculated. As index changes, so do the rates in an adjustable rate mortgage.

Indexed Rate / Fully Indexed rate

An index rate plus the margin. Interest rates are attached to an index which gives the interest rate. Lenders add a margin on top of that interest rate which is the final price given to the borrower. For example, if the index is 4% and lender’s margin is 2.75% the indexed rate will be 6.25%.

Inflation

Inflation happens when money supply surpasses the value of goods and services in an economy. In an event of inflation, goods become more expensive, while less can be bought with the same amount of money.

Informal Trust

When a parent registers an investment account in his/her name, but in trust of a child. As the child grows up, reaching legal age, that child can access and use an investment account. This can be regarded to as a safeguard move on parents’ side, to ensure their kids have access to an investment account in case anything happens to them.

Infrastructure

Essentials of a modern community such as a city, province or a country. Infrastructure refers to roads, rails, supply systems, sewers, public transit, schools, bridges, water systems, electricity, etc.

Injunction

Injunction is a court order which dictates or prohibits a person doing certain actions. If that person refuses to follow injunction, he/she can be fined or imprisoned.

Inspection

Inspection of a property to determine its condition and to identify needed repairs. Some buyers may hire an inspector before buying property to ensure that the property is in the condition the seller claims it is.

Inspection Report

Report produced after property was inspected by an inspector. Inspection report details condition of a property and highlights repairs that must take place.

Inspection: Inspection of a property to determine its condition and to identify needed repairs. Some buyers may hire an inspector before buying property to ensure that the property is in the condition the seller claims it is.

Inspection Fees

Fees charged for an inspection. Inspection is usually conducted by a third party.

Installment

Regular payment made towards reducing the debt. For example, Ron owes $100.000 to his lender. He may pay $1000 every month that goes towards reduction of that debt or in other words – paying installments. 

Installment Contract

Obligation where buyer pays in a series of continuous partial payments. Mortgage is a perfect example of an installment contract. Once you get a mortgage you agree to pay it out with continuous partial payments.

Installment credit / Installment Loan

A loan which can be repaid over a period of time, together with interest rate by means of continuous partial payments. Mortgage is a perfect example of an installment credit. Once you get a mortgage you agree to pay it out, together with interest by means of continuous partial payments.

Institute of Canadian Bankers / ICB

Institute providing training and education to individuals who will be working in financial and banking industries.

Insufficient Funds / NSF

Not enough money on the bank account. Usually refers to chequing or credit accounts.   

Insurance

Contract which pays a sum of money to a company or an individual in an event certain conditions take place. For example, if you get into an accident, without causing it – your insurance company will pay you for the damages. You must also pay monthly premiums to the insurance company to be covered by insurance.

Insurance Title

Insurance that protects owner from losing ownership to a property. For example, Ron owns a house. Julie may come in later claiming that her parents used to own that house and that she has rights to it. Insurance title will represent Ron’s interests in court and in case he loses, will pay his a sum of money for losing his property. That sum can be market value of his house or less, depending on insurance title contract.

Insurable Title

House ownership that the insurance company is willing to ensure.

Insurance Title: Insurance which protects the owner from losing ownership of a property. For example, Ron owns a house. A lady may come in later claiming that her parents used to own that house and she has rights to it. Insurance title will represent Ron’s interests in court and in case he loses, will pay his a sum of money for loosing the property. That sum can be market value of his house or less, depending on insurance title contract.

Insurance binder

A written document that confirms that property will be insured when transfer of ownership rights takes place.

Insurance Broker

Person who sells insurance.

Insurable Value

Cost of insured assets which represent their actual value, not the market price. For example, Viki’s house was burned down. Market price for that house is $150.000, including $25.000 for the piece of land that her house is located on. Insurable Value will not include the value of the land and only pay back $125.000 for building structure.

Insulation

The use of special materials to keep heat within the walls and pipes.

Intangible Assets / Intangible Property

Assets that are not physical. For example: software programs, trademarks, patents, copyrights, etc.

Interac

Largest Canadian ATM network that allows Canadians to access their bank account from Interac machines and withdraw desired amount of money.

Interac Direct Payment

System used throughout Canada in retail locations. Whenever you purchase goods or services, in most cases you have the options of paying with a debit card. When a retailer swipes your card and you enter a password, Interac Direct Payment requests information from you bank account. Bank responds, letting you know whether the password was right. You’re then asked to pay for the goods, where Interac Direct Payment requests information from the bank account, asking if it should let it through or to block it. Bank checks the balance and responds with an answer, after which the transaction is complete.

Interest

Charge for the privilege of borrowing money, expressed as the percentage rate. For example, I borrowed $1.000 from YYY bank. YYY bank will charge 6% interest for the privilege of lending me money.

Interest Rate / Interest Accrual Rate

Rate at which the interest is charged, expressed as a percentage. Interest rates vary and do not stay fixed, as they depend on market conditions.

Interest: Charge for the privilege of borrowing money, expressed as the percentage rate. For example, I borrow $1.000 from YYY bank. YYY bank will charge me 6% interest for the privilege of giving me the money.

Interest Rate Buy-Down Plan

Option that allow borrowers to reduce interest rates in the first years of a mortgage by paying an additional sum. For example, if I want to pay less interest, I can pay a sum of money to the lender and my interest rates will be reduced for a number of upcoming years. That sum will gradually pay for the interest every month. In a long term context, buy downs reduce interest, since you provide lenders with guaranteed stream of income for a limited time.  

Interest Income

Income based on received interest. This can refer to the savings account, which accumulates interest over time, producing some income. This also refers to the banks and lenders, who receive income by lending money at interest.

Interest Adjustment Date

In an adjustable(variable) rate mortgage, interest rates change periodically. The date at which the interest rates change is called the adjustment date.

Initial Interest Rate

In an adjustable(variable) rate mortgage, interest rates change periodically. The initial interest rate is the rate given to borrowers when they sign up for an adjustable rate mortgage. It is subject to change at a later date.

Initial rate period

In an adjustable(variable) rate mortgage, interest rates change periodically. Initial rate period, is the time where lenders give an introductory rate to the borrowers. After that period passes, interest rates change. For example, Julia got an adjustable rate mortgage. Her starting interest rate is 5% and the Initial rate period is 2 years, meaning that the rates will stay 5% for two years and then change. 

Interest accrual period

Period over which the interest owed to the lender is calculated.

Interest Rate Differential / IRD

A measure of interest rates between two similar assets.

Interest Rate Guarantee

A guarantee that offers borrowers a certainty of an interest rate before they sign up for a mortgage. For example, lender may guarantee an interest rate to the borrower if he signs up for a mortgage in the next 60 days.

Interest Due

Interest owed to the lender.

Interest deduction

Money paid in interest to the lender which are tax deductible. For the interest to be tax deductible it has to meet certain criteria.

Interest Rate Cap / Interest rate ceiling

Limit on the interest rate for an adjustable rate mortgage. For example Ron has an adjustable rate mortgage starting at a rate of 6%, but with the cap of 8%. No matter the market, his interest rates will not go higher than 8% in an adjustable rate mortgage.

Interest Rate Decrease Cap / Interest rate floor

Interest rate decrease cap is a mortgage provision that blocks interest rates from going down below a set limit. In an adjustable rate mortgage interest rates change on regular basis. Interest rate decrease cap makes sure that the interest rates never go down below a set limit.

Interest-only Loan / Interest-only Mortgage / Interest Only Home Loan

Loan where the borrower pays only the interest for a set period of time. The time span is usually around first 5 to 10 years towards interest, with the rest of the mortgage being principal plus interest. Only interest payment will be lower than those of both principal and interest, however borrowers will be put under a lot of pressure when time for paying principal comes. Not only payments go up, they will be quite high, since principal was not paid out and needs to be taken care of in a short period of time.

Interest only mortgages are attached to an index, meaning that rates are adjustable and go both up and down during periods of interest and interest + principal.

Interest only mortgage is suitable for individuals who are sure that their income will rise substantially over the coming years and want their dream home without waiting for years.

Internal Rate of Return / IRR

Metric used by companies to determine whether or not they should invest in a project. Companies look at different projects and at different times. Projects with the highest IRR are most likely to be selected.

International Banking

Banking between banks located in different countries. This involves transactions from one country to another.

Interim Financing / Construction Loan

Loan taken by a construction firm to fund its projects. It is a kind of loan which cannot be financed long term and is generally arranged for shorter periods of time.

Intermediate Term Mortgage

Mortgage loan that has 20 or less years left at the time of purchase. For example, YYY bank gave a loan to Ron for 30 years. YYY bank had the loan for 15 years and then sold it to AAA bank. Since it has only 15 years left, it can be called intermediate term mortgage

Investment

Putting money into something for profit. This can be real estate property, start up companies, shares, bonds, gold, etc.

Investment Banking

Distribution of financial assets, such as securities, bonds, maturities etc. An investment banker will buy a “wholesale” quantity of financial assets at his own risk. He will then sell it to other investors for profit(since they don’t need large quantities).

Investment Property

Property owned for the purposes of making money. This can be rental apartment complex, shopping center, office building, etc.

Investment Income

Income earned from investments.

Irrevocable

Something that cannot or will not change. For example, bank issued a foreclosure notice, stating that unless a certain amount is paid within limited timeframe, it will proceed with the foreclosure  and will not change the decision otherwise.

Itemized Deductions

Tax deductions from persons income, which was spend on certain items/service, which are usually medical expenses, property taxes, business expenses. To do itemized deductions individuals must keep track of each and every item/service they bought throughout the year.

For example, Ron made $50.000 last year. He also spent a $7.000 on various services and items. If has correct recites that can be traced for each separate item, he can write off $7.000 as a business expense, saving on taxes.