The terms surrounding a reverse mortgage can be confusing. Below is the first post in our series of a reverse mortgage glossary. Early posts will focus on terms for beginners, but later posts will become more advanced. The glossary will then be posted on our website.
Mortgage Terminology Part 1:
Adjustable-Rate Mortgage (ARM)- A loan with an interest rate that changes with market conditions on pre-determined dates.
Appraisal- A report that states an opinion on the value of a property based on its characteristics and the selling prices of similar properties or comparable properties in the area.
Appreciation- An increase in the value of a house due to changes in market conditions or other causes.
Closing – The final step after a lender approves an application. The occasion when a borrower signs loan documents, including the mortgage or deed of trust, and when closing costs are paid.Also referred to as “settlement.”
CMT – Constant Maturity Treasury – Also often known as a “treasury bill” or “T-Bill,” it helps set the interest rate for some adjustable rate mortgages.
Deed of Trust-The legal document encumbering title to a property.
Equity- The portion of the value of the property that exceeds the current amount of your home loan. If, for example, the property is worth $100,000 and the loan is for $75,000, then there is $25,000 (25% equity) remaining in your home.
HECM (Home Equity Conversion Mortgage) – The most common type of FHA insured mortgage. HECMs encompass 100% of reverse mortgage transactions in 2009, and 99% in 2008.
HELOC (Home Equity Conversion Loan) – a loan sometimes mistakenly considered similar to a reverse mortgage.