Here is a list of reverse mortgage terms to help you better understand the reverse mortgage program.

Adjustable Rate: An optional interest rate that can vary throughout the life of the loan.

Appraisal: Based on the features of your home and the comparable home values in the area, a federally approved appraiser will estimate a value for your home.

Appraised Value: The evaluation of a property’s value based on an FHA approved appraiser.

Closing Costs: The total amount that is required in order to close the loan.

Counseling: Counseling for a reverse mortgage is facilitated by a third party, approved by the United States Department of Housing and Urban Development (HUD). The counselor’s job is to makes sure you fully understand the reverse mortgage loan program and all of your other financial options.

Credit Line: A credit line, also known as a line of credit, is where a lender extends a specific amount of credit to a borrower.

Disbursement: Disbursement occurs when the loan is paid out.

Federal Housing Administration (FHA): The FHA is a government program designed to set standards for construction, underwriting, and insuring loans made by banks and private lenders.

Home Equity: The value of a home after all debts have been subtracted out.

HECM Fixed: A rate option designed for people requiring a greater amount of money to pay for mandatory obligations like their current mortgage balance, property liens, repair requirements and reverse mortgage loan closing costs. You will receive your money in one lump sum at closing and with a low fixed rate that will remain the same through the life of the loan.

HECM Line of Credit: There are 3 different payment options with this product. One option offers lower closing costs by limiting your initial money disbursement for the first year based on the FHA pre-determined limit. Other options include receiving your money in smaller amounts monthly, a full draw on your line of credit at closing, accessing your line of credit when you need to or any combination of these. Another great benefit of this option is your unused line of credit may grow over time.

HECM for Purchase: This allows you to finance the purchase of a home using a reverse mortgage with no monthly mortgage payments.* This option gives seniors the chance to find a home that meets their needs or move closer to family. Please contact a reverse mortgage expert for more information or click here.

HUD: United States Department of Housing and Urban Development is a federal agency that oversees the FHA and various other housing and community development programs.

Living Trust: A living trust is one that is created while you are living.

Loan Balance: The balance of the loan including the principle and interest.

London Interbank Offered Rate (LIBOR): An index that is used to calculate the interest rate adjustments on HECM adjustable rate loans. Click here to learn more.

Lump Sum: A lump sum is a single payout of the loan to the borrower during closing.

Non-Recourse Loan: A non-recourse loan insures that no other assets other than the home itself may be acquired if the balance of the loan becomes greater than the appraised value of the home. If you sell your home in order to pay back the loan balance, you or your heirs will never owe more than the loan balance or value of the property. For more information on non-recourse loans click here.

Mortgage Insurance Premium (MIP): The FHA requires that the borrower pay a fee to HUD or another private insurer for mortgage insurance.

Origination fee: The borrower is charged an origination fee for the processing of the loan application.

Property Insurance: Property insurance is required to close all reverse mortgage loans and covers damages to the property such as fire, flood, and earthquakes.

Property Liens: A legal claim on home that grants the holder of the lien a certain amount of money upon the sale of the property. The best example of a property lien is a mortgage.

Reverse Mortgage: A reverse mortgage is a financial tool created for seniors over the age of 62 that uses the equity in their homes to elimate their mortgage payments* and give them tax-free** cash to spend as they wish. For a detail description of how a reverse mortgage works click here.

Supplemental Security Income (SSI): A federal income supplement program designed to help the aged, blind, and disabled with little to no income.

Trust: An arrangement under which one person, known as a trustee, holds a legal title to a property, for another person known as a beneficiary.

*Homeowner is still responsible for taxes, insurance and property maintenance.


**Please consult with your financial advisor.