Acceleration clause - the part of a contract that says when a loan may be declared due and payable
Adjustable rate - an interest rate that changes, based on changes in a published market-rate index
Appraisal - an estimate of much a house would sell for if it were sold; also called its market value.
Cap - a limit on the amount an adjustable interest rate may go up or down during a specified time period
Closing - a meeting where documents are signed to "close the deal" on a mortgage; the time a mortgage begins
CMT rate - the Constant Maturity Treasury rate, used as an interest rate index in the HECM program
Creditline - a credit account that lets a borrower decide when to take money out and also how much to take out; also known as a "line-of-credit" or "credit line."
Current interest rate - in the HECM program, the interest rate currently being charged on a loan, which equals one of the HUD-approved interest rate indices (1-month CMT, 1-year CMT, or 1-month LIBOR) plus a margin
Deferred payment loans (DPLs) - reverse mortgages that give you a lump sum of cash to repair or improve a home; usually offered by state or local governments
Expected interest rate - in the HECM program, the interest rate used to determine a borrower's loan advance amounts; it equals either the 10-year CMT or the 10-year LIBOR rate plus a margin (see below)
Federal Housing Administration (FHA) - the part of the U. S. Department of Housing and Urban Development (HUD) that insures HECM loans
Federally insured reverse mortgage - a reverse mortgage guaranteed by the federal government so you will always get what the loan promises; also, a
Home Equity Conversion Mortgage (HECM)
Fixed monthly loan advances - payments of the same amount that are made to a borrower each month
Home equity - the value of a home, subtracting any money owed on it
Home equity conversion - turning home equity into cash without having to leave your home or make regular loan repayments
Home Equity Conversion Mortgage (HECM) - the only reverse mortgage program insured by the Federal Housing Administration, a federal government agency
Home value limit - in the HECM program, the largest home value that can be used to determine a borrower's loan advances
Initial interest rate - in the HECM program, the interest rate that is first charged on the loan beginning at closing; it equals one of the HUD-approved interest rate indices (1-month CMT, 1-year CMT, or 1-month LIBOR) plus a margin
Leftover equity - the sale price of the home minus the total amount owed on it and the cost of selling it; the amount the homeowner or heirs get when the house is sold.
LIBOR - the London Interbank Offered Rate, used as an interest rate index in the HECM program
Loan advances - payments made to a borrower, or to another party on behalf of a borrower
Loan balance - the amount owed, including principal and interest; capped in a reverse mortgage by the value of the home when the loan is repaid.
Lump sum - a single loan advance at closing
Margin - in the HECM program, the amount added to an interest rate index to determine the initial, current, and expected interest rates
Maturity - when a loan must be repaid; when it becomes "due and payable"
Mortgage - a legal document making a home available to a lender to repay a debt
Non-recourse mortgage - a home loan in which the borrower generally cannot owe more than the home's value at the time the loan is repaid
Origination - the process of setting up a mortgage, including preparing documents
Property tax deferral (PTD) - reverse mortgages that pay annual property taxes; usually offered by state or local governments
Proprietary reverse mortgage - a reverse mortgage product owned by a private company
Reverse mortgage - 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 recission - a borrower's right to cancel a home loan within three business days of the closing
Tenure advances - fixed monthly loan advances for as long as a borrower lives in a home
Term advances - fixed monthly loan advances for a specific period of time
Total Annual Loan Cost (TALC) rate - the projected annual average cost of a reverse mortgage including all itemized costs
U.S. Department of Housing and Urban Development (HUD): A federal agency that oversees the Federal Housing Administration (FHA) and numerous housing and community development programs.