203-b limit

The maximum amount of a home’s value that can be used to determine the dollar amount a borrower receives from a federally insured HECM reverse mortgage; varies by county; the name comes from section 203 (b) of the National Housing Act

Acceleration Clause

A stipulation in a contract that allows for the lender to declare a loan due or demand more collateral; only allowable in certain circumstances such as bankruptcy, non-payment of taxes, or failure to make payments

In a reverse mortgage scenario, the house must be insured, taxes paid, and kept in good repair. Failure to do so could result in the the loan coming due – amounting to an acceleration.

Adjustable Rate

Any interest rate that changes periodically based on published market rates.

The Reverse Mortgage Rates adjust monthly or annually, depending on the terms of the agreement. You must ask your reverse mortgage lender about this.

Annuity

A contract (usually designed by an insurance company) that provides cash payments in a specified interval. In the right situation, purchasing a "post retirement" annuity can be an excellent move.

People sometimes refer to a reverse mortgage as a Reverse Annuity Mortgage. Receiving monthly income with reverse mortgage proceeds is, in many ways, like purchasing an annuity. Except your house becomes the instrument used to purchase the annuity.

Clicking Reverse Mortgage Annuity will lead you back to our homepage.

Appraisal

The estimated amount of a home’s value based on the market rate; also called market value. The reverse mortgage lender will find a qualified appraiser.

Generally, the higher the appraisal, the more money you will be able to qualify for with a reverse mortgage. A reverse mortgage is based on your age, your home’s value (appraisal), and what county you live in.

Appreciation

The increase in value in a home or any other asset. The more your home appreciates in value while you have a reverse mortgage outstanding, the more equity could possibly be left over to leave to heirs.

Area Agency on Aging

Local or regional nonprofit organization that provides information for older Americans on services and programs; usually part of a national network created under the 1971 Older Americans Act (OAA)

Cash-Out Refinance

A refinance transaction where the amount of money from the new loan is greater than the total of the money needed to repay the existing first mortgage, closing costs, points, and the amount required to satisfy any outstanding subordinate mortgage liens.

A refinance transaction where borrower receives additional cash that can be used for any purpose.

Many folks ask: HELOC vs. Reverse Mortgage
Cash out refi vs. Reverse Mortgage is similar question

Read the Reverse Mortgage Page to learn differences

Closing

The finalizing of a mortgage; this is the time when documents are signed and the mortgage begins. The reverse mortgage closing process is much the same as a traditional or "forward" mortgage.

Condemnation

The legal action declaring a property is unfit for use or is being seized by the government through eminent domain.

Property subject to a reverse mortgage must be kept insured, in good repair, and the taxes paid. Assuming these things are done, condemnation with a reverse mortgage is not an issue.

Credit Line

A credit account allowing the borrower to receive money from the lender at the borrower’s intervals and amounts; also called a line of credit

It is a popular feature of reverse mortgages. Many people decide to use a combination of cash up-front and a credit line.

Current Interest Rate

The present rate being charged on a loan; in the HECM program it equals the one year U.S. Treasury rate plus the lender’s margin. The lender’s margin varies depending on the type of reverse mortgage product selected.

Deferred Payment Loans

A loan that gives the borrower an amount of money which has to be paid back at a certain point in the future; reverse mortgages and student loans both fall into this category. Payments on a reverse mortgage are deferred until death or a permanent move.

Depreciation

The decrease in value in a home or any other asset.

Elder Law Attorney Definition

A lawyer who practices in the area of law involving seniors and aging. Not only should this attorney be able to handle medicare, medicaid, and asset titling issues, but wills, trusts, estates, and taxes as well.

The obtaining of a reverse mortgage is an excellent time to consult an elder law attorney for planning issues. To read more on this, click here.

Expected Interest Rate

Used to determine loan advance amounts; in the HECM program it is calculated by using the 10-year U.S. Treasury rate plus the lender’s margin.

Fannie Mae

A congressionally chartered private company that buys mortgages and sells them to investors. Currently, Fannie Mae purchases all HECM reverse mortgages.

Federally Insured

A guarantee of the government in the form of insurance; pertaining to reverse mortgages, the loan is backed by the federal government so that the borrow always gets what is promised by the lender; see Home Equity Conversion Mortgage (HECM)

Fixed Monthly Loan Advances

A certain amount of money that is made to a borrower from a lender each month.

Home Equity

The appraised value of a home minus any outstanding loans on the home; related to leftover equity.

Home Equity Conversion Mortgage (HECM)

A federally insured reverse mortgage. Approximately 90% of all reverse mortgages are of the HECM variety. Explore all options when interested in a HECM reverse mortgage.

Home Equity Loan

An agreement in which a home is used as collateral for a loan. Click here to analyze Home Equity Line of Credit vs Reverse Mortgage using the Reverse Mortgage Page.

Housing and Urban Development (HUD)

U.S. Federal Department that encourages housing; FHA is a division of HUD. Reverse mortgages are sometimes called HUD Reverse Mortgage, which is not an official term – it means only reverse mortgages.

Initial Interest Rate

The rate that is charged at closing; under HECM it equals the one year U.S. Treasury rate plus a margin. The margin varies by lender and determines profits the lender makes with reverse mortgages.

Leftover Equity

The sale price of a home minus outstanding loans and the cost of selling the home; the amount a homeowner or heir would receive when the house is sold.

Loan Balance

The amount a borrower owes to a lender including the principle loan and interest; the balance is capped in a reverse mortgage according to the appraised value of the home when the loan is repaid.

Long-Term Care Insurance

Coverage that, under specified conditions, provides skilled nursing, intermediate care, or custodial care for a patient (generally over age 65) in a nursing facility or his or her residence following an injury. Click Reverse Mortgages and Long-Term Care Insurance to see our article on the subject.

Lump Sum

A single advance for the amount due; in relation to reverse mortgages it’s a loan advance paid at closing.

Margin

The amount that is added to the U.S. Treasury rate in order to determine the initial, current, and expected interest rates in accordance to HECM standards; set by the lender

Maturity

The point in time when a debt or loan must be repaid.

Mortgage

A loan that designates a home as collateral to repay the debt; has specific interest rates with the borrower having appointed times to make payments.

Origination

The beginning of a mortgage.

Origination Fee:

A fee that is charged by the lender in order to place and process the borrower’s loan application.

Reverse Mortgage Originator:

The individual who assists in the process of obtaining a reverse mortgage. You can find a reverse mortgage broker by using the Reverse Mortgage Page.

Property Tax Deferral (PTD)

A program for seniors the allows property taxes to be deferred; usually paid by a reverse mortgage or through state or local government programs

Proprietary Reverse Mortgage

A reverse mortgage or reverse mortgage product owned by a private company. Just because a reverse mortgage is not of the HECM variety, or federally insured, does not mean it is not a credible reverse mortgage. In fact, in many situations, the proprietary product may be the best reverse mortgage option.

Reverse Annuity Mortgage

An arrangement where a homeowner uses a reverse mortgage to purchase a tax-free annuity. Use the Reverse Mortgage Page’s lender to learn more about a reverse annuity mortgage.

Reverse Mortgage

A loan that provides a cash advance from the lender to the borrower against the equity in a home; reverse mortgages do not need to be repaid as long as the borrower lives in the home nor can the mortgage exceed the value of the home.

Reverse Mortgage Calculator

A reverse mortgage calculator will show you how much cash you can get if you take out a reverse mortgage. The amount varies based on age, location (each county has a different 203-B limit), and house value/current payoff.

If the figures you see are in red – you have a shortfall. You will need to have that much cash at closing just to pay off your existing mortgage. Cash available after paying off liens is the important number, as you will have to pay off your current mortgage or mortgages from the proceeds of the reverse mortgage.

In addition, if one spouse is under 62, you will note the calculator produces no results. This is because individuals under the age of 62 cannot get a reverse mortgage. Even if it is only one borrower.

The amount you can get is based on the younger spouse’s age.

Click: Reverse Mortgage Calculator to use our calculator.

Reverse Mortgage Counseling

Required by HUD in order to obtain a HECM reverse mortgage; counselors help borrowers understand their options and provide knowledge and information. An incredibly helpful service. Your reverse mortgage originator can help you find unbiased counseling.

Reverse Mortgage Originator

The person or company who answers questions, help the borrower choose the right type of loan, provides documents, and sends documents through to the lender.

Reverse Mortgage Page

This website is the reverse mortgage page.
The Reverse Mortgage Page presents reverse mortgage information is a concise, clear, easy to use fashion. The goal is to educate consumers and assist them in taking the next step of finding the right reverse mortgage lender for them. There are many articles by top experts in the reverse mortgage field. In addition, there is a reverse mortgage calculator, a caregivers section, and a free senior finances email learning series.

Right of Rescission

The right of a borrower to cancel a loan within three business days of closing without penalty.

Servicing

The administration of a mortgage after closing; includes sending statements, maintaining records, and calculating interest rates.

Servicing fees vary by reverse mortgage lender – and it is a question you should ask.

Shared Equity

An arrangement where a borrower and a lender agree on a specific loan cost so that when the loan reaches maturity, the lender is entitled to a share in the home’s equity.

Supplemental Security Income (SSI)

A federal program created under the Social Security Act that provides monthly income for low-income individuals who are seniors. Also available to the blind or disabled.

Tenure Advances

Fixed monthly payments that are given to a borrower as long as they live in the home.

Total Annual Loan Cost (TALC) Rate

The estimated yearly cost of the loan. Ask your reverse mortgage originator about the TALC rate very early in your discussions.

T-rate

U.S. Treasury rate that under the HECM loan is used to determine, initial, expected, and current interest rates.