Reverse Mortgage Glossary of Terms
by Francine Huff
July 17th, 2009
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There’s a lot of press these days about reverse mortgages and some of the information can seem confusing. If you’re intent on researching the pros and cons of using this type of mortgage product, you’ll need to understand what some of the key terms are. Here’s a glossary of some terms that are related to reverse mortgage loans.
Reverse mortgages allow homeowners 62 and up to convert some of the equity in their homes into cash, which does not have to be repaid until they move or die.
Home equity is the appraised value of a home minus the amount owed on a mortgage loan.
Home Equity Conversion Mortgage (HECM) is the only reverse mortgage that is federally insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development.
Appraisal is the market value of a house, or the price it would be expected to get if it were sold.
Line of credit, or credit line lets borrowers access funds from a reverse mortgage when they need it.
Lump sum is when funds from a reverse mortgage are paid all at once when the loan closes.
Leftover equity is the amount that a borrower’s heirs will get after a home has been sold and the reverse mortgage loan has been paid off.
Closing is where all documents related to a reverse mortgage are signed.
Term advances are fixed monthly payments that are paid out for a specific period of time.
Loan balance is the total owed on a loan, which includes principal and interest.
There are a lot of things to consider before signing up for a reverse mortgage. Get as much information as possible before talking with reverse mortgage counselor. Get free, no-commitment loan quotes from our trusted network of lenders.
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