Glossary

Terms to Know

Reverse Mortgage Glossary

Acceleration Clause

The part of a contract that says when a loan may be declared due and payable.

Adjustable Rate

An interest rate that changes, based on changes in a published market rate index.

Appraisal

An estimate of much a house would sell for if it were sold; also called its market value.

Appreciation

An increase in a home’s value.

Area Agency on Aging (AAA)

A local or regional nonprofit organization that provides information on services and programs for older adults.

Cap

A limit on the amount an adjustable interest rate may go up or down during a specified time period.

Closing

A meeting where documents are signed to “close the deal” on a mortgage; the time a mortgage begins.

CMT Rate

The Constant Maturity Treasury rate, used as an interest rate index in the HECM program.

Condemnation

A court action saying a property is unfit for use: also, the government taking private property to use for the public by the right of eminent domain.

Credit Line

A credit account that lets a borrower decide when to take money out and also how much to take out; also known as a “line of credit” or “credit line.”.

Current Interest Rate

In the HECM program, the interest rate currently being charged on a loan, which equals one of the HUD approved interest rate indices (1month CMT, 1year CMT, or 1month LIBOR) plus a margin.

Deferred Payment Loans (DPLs)

Reverse mortgages that give you a lump sum of cash to repair or improve a home; usually offered by state or local governments.

Depreciation

A decrease in the value of a home.

Eminent Domain

The right of a government to take private property for public use; for example, taking private land to build a highway.

Expected Interest Rate

In the HECM program, the interest rate used to determine a borrower’s loan advance amounts; it equals either the 10year CMT or the 10year LIBOR rate plus a margin (see below).

Fannie Mae

A government sponsored enterprise (GSE) that buys and is supervised by the federal government.

Federal Housing Administration (FHA)

The part of the U. S. Department of Housing and Urban Development (HUD) that insures HECM loans.

Federally Insured Reverse Mortgage

A reverse mortgage guaranteed by the federal government so you will always get what the loan promises; also, a Home Equity Conversion Mortgage (HECM).

Fixed Monthly Loan Advances

Payments of the same amount that are made to a borrower each month.

Home Equity

The value of a home, subtracting any money owed on it.

Home Equity Conversion

Turning home equity into cash without having to leave your home or make regular loan repayments.

Home Equity Conversion Mortgage (HECM)

The only reverse mortgage program insured by the Federal Housing Administration, a federal government agency.

Home Value Limit

In the HECM program, the largest home value that can be used to determine a borrower’s loan advances.

Initial Interest Rate

In the HECM program, the interest rate that is first charged on the loan beginning at closing; it equals one of the HUD approved interest rate indices (1MTH CMT, 1YR CMT, or 1MTH LIBOR) plus a margin.

Leftover Equity

The sale price of the home minus the total amount owed on it and the cost of selling it; the amount the homeowner or heirs get when the house is sold.

LIBOR

The London Interbank Offered Rate, used as an interest rate index in the HECM program.

Loan Advances

Payments made to a borrower, or to another party on behalf of a borrower.

Loan Balance

The amount owed, including principal and interest; capped in a reverse mortgage by the value of the home when the loan is repaid.

Lump Sum

A single loan advance at closing.

Margin

In the HECM program, the amount added to an interest rate index to determine the initial, current, and expected interest rates.

Maturity

When a loan must be repaid; when it becomes “due and payable”.

Model Specifications

Rules recommended by AARP for analyzing and comparing reverse mortgages.

Mortgage

A legal document making a home available to a lender to repay a debt.

Non-recourse Mortgage

A home loan in which the borrower generally cannot owe more than the home’s value at the time the loan is repaid.

Origination

The process of setting up a mortgage, including preparing documents.

Property Tax Deferral (PTD)

Reverse mortgages that pay annual property taxes; usually offered by state or local governments.

Proprietary Reverse Mortgage

A reverse mortgage product owned by a private company.

Reverse Mortgage

A home loan that gives cash advances to a homeowner, requires no repayment until a future time, and is capped by the value of the home when the loan is repaid.

Right of Rescission

A borrower’s right to cancel a home loan within three business days of the closing.

Servicing

Administering a loan after closing, such as maintaining loan records and sending statements.

Supplemental Security Income (SSI)

A federal monthly income program for low income persons who are aged 65+, blind, or disabled.

Tenure Advances

Fixed monthly loan advances for as long as a borrower lives in a home.

Term Advances

Fixed monthly loan advances for a specific period of time.

Total Annual Loan Cost (TALC) Rate

The projected annual average cost of a reverse mortgage including all itemized costs.

Get Started

As an Approved Counseling Agency, our HECM counselors will discuss keys of a reverse mortgage with you and upon completion of the session will present you a Certificate of HECM Counseling.

Request an Appointment

Reverse Mortgages are increasing in popularity with seniors who have equity in their homes and want to supplement their income.

The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage or HECM, and is only available through an FHA approved lender.

-U.S. Department of Housing and Urban Development (HUD)