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Glossary Terms
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This is by no means a complete list of all mortgage terms. I have a dictionary of terms that is just slightly smaller than a pocket size dictionary of the english language. If you want to know the definitation of a term that is not listed below, or you want a printed out copy of this list, please contact me at: 916.853.0224.
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1003 The number assigned to the form all potential customers must complete to apply for a home loan. This application is commonly referred to as "the 1003" and is produced by the Federal government.

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.

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.

Application Fees A charge imposed by your lender to cover the initial costs of processing your loan request and checking your credit report.

Appraisal An estimate of much a house would sell for if it were sold; also called its market value.

Appraisal Fee This fee pays for an appraisal that is a supportable and defensible estimate or opinion of the value of the property.

Appreciation An increase in a home's value.

APR or Annual Percentage Rate The Annual Percentage Rate is a measure of the cost of credit, expressed as a yearly rate. The APR takes into account the amount financed, the finance charge, and the amounts and timing of the payments. Under the Truth in Lending Law, the APR must be disclosed and labeled.

ARM or Adjustable Rate Mortgage A mortgage loan where the interest rate is not fixed for the entire term of the loan, and can change during the life of the loan in line with movements of an index rate.

Balloon Payment A large payment due at the end of a loan contract. Equal to the remaining principal balance plus any interest and charges due.

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 The interest rate currently being charged on a loan; it equals the one-year rate for U.S. Treasury Securities, plus a margin.

Deferred Payment Loans (DPLs) Available from many local and state governments and is typically loaned for repairs or making improvement to one's home. This is a type of reverse mortgage that gives a lump sum, one-time amount and borrowers are not required to pay back the money as long as they live in their home.

Depreciation A decrease in the value of a home.

Eminent Ddomain The right of a government to take private property for public use; for example, taking private land to build a highway.

Expected Interest Rate 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.

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.

HECM Program The HECM FHA insured reverse mortgage can be used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. The loan, commonly known as HECM, is funded by a lending institution such as a mortgage lender, bank, credit union or savings and loan association.

Lender's Attorney's Review Fees The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender. Settlements are conducted by lending institutions, title insurance companies, escrow companies, real estate brokers, and attorneys for the buyer and seller. In most situations, the person conducting the settlement is providing a service to the lender.

Loan Origination Fees and Discount Points The origination fee is charged for the lender's work in evaluating and preparing your mortgage loan. Discount points are prepaid finance charges imposed by the lender at closing to increase the lender's yield beyond the stated interest rate on the mortgage note. One point equals one percent of the loan amount. For example, one point on a $75,000 loan would be $750. In some cases, adding them to the loan amount can finance the points you pay. The total number of points a lender charges will depend on market conditions and the interest rate to be charged.

Prepayment Penalty A prepayment penalty on your present mortgage. The practice of charging money for an early pay-off of the existing mortgage loan varies by state, type of lender, and type of loan. Prepayment penalties are forbidden on various loan including loan from federally chartered credit unions, FHA and VA loans, and some other home-purchase loans. The mortgage documents for your existing loan will state if there is a penalty for prepayment. In some loans, you may be charged interest for the full month in which you prepay your loan.

Home Eequity 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 Rrate 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 Eequity 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 The 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 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 Rrecission 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 Eequity 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.

Title Search and Title Insurance A charge to cover the cost of examining the public record to confirm ownership of the real estate. It also covers the cost of a policy, usually issued by a title insurance company that insures the policyholder in a specific amount for any loss caused by discrepancies in the title to the property.

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.
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