| Word |
Definition |
| Appraisal |
A research report that a lender uses to establish the fair market value of a property.
The most important factor in the appraised value is
the sale prices of similar homes in the area (these are known as "comparables" or "comps").
|
| Appreciation |
An increase in the value of a property over time. |
| ARM |
Adjustable Rate Mortgage. A loan with an interest rate that changes based on an underlying market rate like the
prime rate, CMT, or LIBOR. |
| Closing |
The final step of the reverse mortgage application process. This occasion is when a borrower signs the
loan documents and closing costs are paid. Also referred to as "settlement." |
| CMT |
Constant Maturity Treasury. Also often known as a "Treasury Bill" or "T-Bill,"
it is one market rate that is used to determine interest rate for adjustable rate mortgages. |
| Deed of Trust |
A legal document that transfers property to a trustee. It is often used to secure an obligation such as a mortgage. |
| Equity |
The worth of an investment in a property. It is the fair market value of the property minus
any liens or mortgages. For example, if the property is worth $100,000 and has a mortgage balance
of $60,000, then there is $60,000 or 60% equity in the property. |
| Fixed Rate Mortgage |
A loan with a set interest rate that does not change over time. |
| HECM |
Home Equity Conversion Mortgage. This is the most common type of reverse mortgage and is insured by the FHA.
99% of all reverse mortgages are HECMs. |
| HELOC |
Home Equity Line of Credit.A short-term loan that typically requires monthly repayments beginning immediately.
|
| LIBOR |
London Interbank Offered Rate. It is one market rate that is used to determine interest
rate for adjustable rate mortgages. The LIBOR is similar to the CMT index but is more popular globally. |
| Principal Limit |
The total loan proceeds available at closing from the reverse mortgage. |
| Principal Residence |
The property where the borrower lives the majority of the calendar year.
The borrower may have only one Principal Residence at a time. |
| Processor |
Person that handles the reverse mortgage application process between time of application and closing. |
| Refinance |
The process of paying off one mortgage with the proceeds from a new mortgage. |
| Reverse Mortgage |
A type of mortgage offered through the Federal Housing Administration (FHA)
that is only available to borrowers age 62 and older. |
| Servicer |
Handles the duties of a reverse mortgage after it is closed such as making monthly disbursements. |
| Settlement |
See "Closing." |
| Title |
A legal document establishing the right of ownership. |
| Title Search |
A check of public records to ensure that a person is the legal owner of a property
and that there are no liens or other claims outstanding on the property. |
