Reverse Mortgage Glossary

203b limit - the maximum dollar amount used in all county for how much of a home's value can be used to regulate the amount of money you can receive from a government insured HECM reverse mortgage; the name derives from Section 203-b of the National Housing Act

acceleration clause - the part of a contract that states when a mortgage could be proclaimed due

adjustable rate - an interest rate that varies, based on changes in a nationally published market-rate index

annuity - a monthly cash payment you receive from an insurance company for the remainder of your life.

appraisal - approximately how much a property might sell for if it were sold; also called its market value

appreciation - the home rises in value

cap - a limit on the amount an adjustable rate mortgage (ARM) may go up or down during a predetermined time frame

closing - when all loan documents are finalized; this is where you sign for the loan

condemnation - a court action stating a property is unfit for use: also the taking of private property for public use by governments using "eminent domain"

credit line - a credit account that permits a borrower to determine when and how much money to take out; also recognized as a "line-of-credit"

current interest rate - in the HECM government program, the interest rate presently being charged on a mortgage loan; it matches the one-year rate for U.S. Treasury Securities, plus the margin (see below)

deferred payment loans - when reverse mortgages offer to give you a either a lump sum or payments in order to repair or improve a home; usually offered by federal, state or local governments

depreciation - when your home decreases in value

eminent domain - the government legal right to take private property for public use; example - the taking private land to build or expand a highway

expected interest rate - in the HECM program, the interest rate used to decide a borrower's loan advance amounts; it matches the 10-year rate for U.S. Treasury Securities, plus a margin (see below)

Fannie Mae - a private company that buys and sells mortgages; a government-sponsored business that is watched, regulated and funded (as of August 2008) by the federal government

FHA - the part of the U. S. Department of Housing and Urban Development known as the Federal Housing Authority that guarantees HECM loans

federally insured reverse mortgage - a reverse mortgage insured by the federal government guaranteeing you always receive you promised payments; also known as Home Equity Conversion Mortgage (HECM)

fixed monthly loan advances - payments made to the borrower each month which consist of the same amount

home equity - the value you have left in your home after you subtract all debts against; such as a mortgage loan

home equity conversion - the process of turning your home equity into cash without having to leave your house or make typical loan repayments

Home Equity Conversion Mortgage (HECM) - the only government insured reverse mortgage program

initial interest rate - when using the HECM program, this is the interest rate which is first charged on the mortgage loan beginning at closing; it equals the one-year rate for U.S. Treasury Securities (plus a margin)

leftover equity - the sale price of the property minus the total amount owed on it, plus fees for selling the home; the amount the homeowner or heirs get when the house is sold after all debts against the home are satisfied.

loan advances - payments made to a borrower, or to another party on behalf of a borrower in advance

loan balance - the amount owed, this includes principal and interest; capped in a reverse mortgage by the appraised value of the property when the mortgage is paid back.

lump sum - a single large payment

margin - in the HECM program, the amount added to the one-year Treasury rate to decide the first and on-going interest rates, and to the 10-year Treasury rate to decide the anticipated interest rate

maturity - when a mortgage loan needs to be repaid; when the loan is considered due and payable

mortgage - a legal document making a property available to a buyer

non-recourse mortgage - a mortgage loan that the borrower can never owe more than the properties value when the loan becomes due and payable

origination - the process of setting up a mortgage, including preparing documents and looking for potential clients

property tax deferral - reverse mortgages that pay annual property taxes; usually offered by state or local governments

proprietary reverse mortgage - enables owners of high value homes access to larger amounts of their home equity.

reverse annuity mortgage - An agreement in which a homeowner borrowers against the equity in their home and gets regular monthly tax-free payments from the mortgage lender, also called the reverse mortgage or home equity conversion mortgage

reverse mortgage - a mortgage loan that allows you to receive cash advances and requires no repayment until a future time, and is capped by the appraised value of the home when the loan is repaid.

right of recession - a borrower's legal right to cancel a home loan within three business days of the closing; a buyer's remorse clause

servicing - administrative duties after a loan closes, such as keeping loan records and sending mortgage statements

shared equity - an itemized loan cost set on a percent of a home's appraised value at loan maturity; example, a 10% shared equity fee on a property worth $200,000 at due date would be $20,000

Supplemental Security Income - a federal approved monthly income program for low-income persons who are aged 65 or older, blind, and/or disabled

tenure advances - fixed monthly loan advances for as long as the homeowner lives in a house

term advances - fixed monthly loan advances for a specific time period

Total Annual Loan Cost rate - the planned yearly average cost of a reverse mortgage including all itemized costs

T-rate - the rate for U.S. Treasury Securities; used to discover the first, expected, and current interest rates for the HECM program

Uninsured reverse mortgage - a reverse mortgage which is due and payable on a specific date