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Reverse Mortgage Terms
203-b limit
- 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; the name comes from Section 203-b
of the National Housing Act
AARP model specifications
- rules recommended by AARP for analyzing
and comparing reverse mortgages
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
annuity
- a monthly cash payment you get from an
insurance company for the rest of your life.
appraisal
- an estimate of much a house would sell for
if it were sold; also called its market
value
appreciation
- an increase in a home's value
Area Agency on Aging (AAA)
- a local or regional nonprofit organization
that provides information on services and
programs for older adults
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
condemnation
- a court action saying a property is unfit
for use: also, the government taking private
property to use for the public by the right
of eminent domain
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; it equals
the one-year rate for U.S. Treasury
Securities, plus a margin (see below)
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
depreciation
- a decrease in the value of a home
eminent domain
- the right of a government to take private
property for public use; for example, taking
private land to build a highway
expected interest rate
- in the HECM program, the interest rate
used to determine a borrower's loan advance
amounts; it equals the 10-year rate for U.S.
Treasury Securities, plus a margin (see
below)
Fannie Mae
- a private company that buys and sells
mortgages; a government-sponsored business
that is watched over by the federal
government
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
initial interest rate
- in the 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
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.
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
the one-year Treasury rate to determine the
initial and current interest rates, and to
the 10-year Treasury rate to determine the
expected interest rate
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 can
never 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 annuity mortgage
- a reverse mortgage in which a lump sum is
used to purchase an annuity that gives the
borrower a monthly income for life.
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
servicing
- administering a loan after closing, such
as maintaining loan records and sending
statements
shared equity
- an itemized loan cost based on a percent
of a home's value at loan maturity; for
example, a 5% shared equity fee on a home
worth $200,000 at maturity would be $10,000
Supplemental Security Income (SSI)
- a federal monthly income program for
low-income persons who are aged 65+, blind,
or disabled
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
T-rate
- the rate for U.S. Treasury Securities;
used to determine the initial, expected, and
current interest rates for the HECM program
uninsured reverse mortgage
- a reverse mortgage that becomes due and
payable on a specific date
Courtesy AARP
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