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Reverse Mortgage Terms

(continued from Reverse Mortgage Terms A-F)...

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"

Model Specifications - rules recommended by AARP for analyzing and comparing reverse mortgages

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

Servicing - Administering a loan after closing, such as maintaining loan records and sending statements

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

American Consumer Credit Counseling (ACCC) is a leading source for personalized debt management advice and programs to consolidate your debt. If you are interested in consolidating debts, contact one of ACCC's credit advisors to learn how to consolidate bills without having to take a consolidation loan as would be suggested by some other debt relief agencies. As a Better Business Bureau accredited credit counseling agency, you can count on ACCC for fair and honest help with credit issues. We are also approved by the Department of Justice to provide pre-bankruptcy counseling and post-bankruptcy credit counseling courses.

American Consumer Credit Counseling - Consolidate Debts - Better Business Bureau American Consumer Credit Counseling - Consolidate Debts - Mass Housing Approved National Industry Standards for Homeownership Education and Counseling American Consumer Credit Counseling - Consolidate Debts  - Council on Accreditation American Consumer Credit Counseling - Consolidate Debts  - NFCC Member