Reverse Mortgage Glossary

203-b limit is the dollar limit in each county for how much of a home's value can be used to determine the amount of money you can get from a federally insured HECM reverse mortgage.
Adjustable rate is an interest rate that changes, based on changes in a published market-rate index.
APR is an annual percentage rate which is a measure of the total cost of the loan expressed as a yearly percentage rate. All APRs are calculated by the lender.
Appraisal is an estimate of how much a house would sell for if it were sold; also called its market value.
Appreciation is an increase in a home's value.
Cap is a limit on the amount an adjustable interest rate may go up or down during a specified time period. The first number is the maximum increase allowed for one adjustment period; the second is the total increase allowed over the life of the loan.
Closing is a meeting where documents are signed to "close the deal" on a mortgage; the time a mortgage begins.
Expected interest rate - HECM program- the expected rate is fixed throughout the life of the loan and is used to determine payments to the borrower.
Federal Housing Administration (FHA) is the part of the U. S. Department of Housing that insures HECM loans.
Fixed monthly loan advances are payments of the same amount made to a borrower each month.
Home equity is the value of a home, subtracting any money owed on it.
Home Equity Conversion Mortgage (HECM) is the only reverse mortgage program insured by the Federal Housing Administration, a federal government agency.
Index is the basis for setting an adjustable rate.
Initial interest rate - HECM program- the interest rate that is first charged on the loan beginning at closing; it equals the one-year rate for U.S. Treasury Securities, plus a margin.
Jumbo loan is generally for higher-valued homes; Offers higher payout compared to HECM loan limits.
Leftover equity equals the sale price of the home, minus the total amount owed on it and the cost of selling it; the amount the homeowner, heirs or estate would get when the house is sold and the loan is paid off.
LIBOR or the London Interbank Offered Rate is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market (or interbank market).
Line of credit is amount of money available from loan for future draws.
Loan To Value (LTV) is the amount available to borrow as a percentage of your home value.
Lump sum is a single loan advance at closing.
Margin is used to calculate the loan's monthly interest rate; Margin + index = new rate when the loan adjusts.
Maturity is when a loan must be repaid.
Mortgage Insurance Premium (MIP) - HECM program- the premium paid for required mortgage insurance, whereby the government guarantees homeowner has access to funds if loan issuer goes out of business.
Non-recourse mortgage is a home loan in which the borrower can never owe more than the home's value at the time the loan is repaid.
Origination is the process of setting up a mortgage, including preparing documents.
Origination fee is a one-time fee paid to the lender at the time the loan closes.
Proprietary reverse mortgage is a reverse mortgage product owned by a private company.
Reverse mortgage is 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 is a borrower's right to cancel a home loan within three business days of the closing.
Servicing is administering a loan after closing, such as maintaining loan records and sending statements.
Tenure advances are equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term advances are equal monthly payments for a fixed period of months selected.
Total Annual Loan Cost (TALC) rate is the projected annual average cost of a reverse mortgage including all itemized costs.