GlossaryTerms to Know
Reverse Mortgage Glossary
The part of a contract that says when a loan may be declared due and payable.
An interest rate that changes, based on changes in a published market rate index.
An estimate of much a house would sell for if it were sold; also called its market value.
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.
A limit on the amount an adjustable interest rate may go up or down during a specified time period.
A meeting where documents are signed to “close the deal” on a mortgage; the time a mortgage begins.
The Constant Maturity Treasury rate, used as an interest rate index in the HECM program.
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.
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.
A decrease in the value of a home.
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).
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.
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.
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.
The London Interbank Offered Rate, used as an interest rate index in the HECM program.
Payments made to a borrower, or to another party on behalf of a borrower.
The amount owed, including principal and interest; capped in a reverse mortgage by the value of the home when the loan is repaid.
A single loan advance at closing.
In the HECM program, the amount added to an interest rate index to determine the initial, current, and expected interest rates.
When a loan must be repaid; when it becomes “due and payable”.
Rules recommended by AARP for analyzing and comparing federally insured reverse mortgages.
Model Specifications for Analyzing and Comparing Reverse Morgages
A legal document making a home available to a lender to repay a debt.
A home loan in which the borrower generally cannot owe more than the home’s value at the time the loan is repaid.
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
Proprietary mortgages are NOT federally insured and are not governed by the same rules as reverse mortgages in the HECM Program. To learn more about each Proprietary mortgage type, you should visit each provider’s website or consult with a Reverse Mortgage adviser for their respective products. ReverseMortgageHelper.org provides counseling for certain Proprietary mortgages as well. When requesting an appointment, let us know you are considering a Proprietary 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.
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.
Fixed monthly loan advances for as long as a borrower lives in a home.
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.
As a HUD Approved Counseling Agency, our Reverse Mortgage counselors will discuss the facts of a Reverse Mortgage with you and upon completion of the session will present you with a Certificate of Counseling.
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)