Mortgage Related Terms

Adjustable rate mortgage (ARM):
This refers to a loan type. An adjustable rate mortgage can adjust every month, every year, or whatever time frame set forth in your loan, unlike a fixed rate loan. The adjustable rate is based on federal interest rates. There may also be an additional amount due to the lender.

Appraisal:
An estimate of the value of your house. It is done by an appraiser who does a physical inspection and factors in the current selling prices of comparable properties. The assessed value should be a fair price that you could conceivably get in the current housing market.

Appreciation:
This is the increase in the value of your home. With a reverse mortgage, appreciation can work in your favor. If your house appreciates before your reverse mortgage loan comes due, the difference between the agreed upon reverse mortgage and the money attained through selling the house would be due you or your heirs.

Cap:
This refers to the interest limit that your ARM - of Adjustable rate mortgage can reach. This is a safeguard for you to limit how high your rate can go.

Closing:
This is when the final paper work is signed and signifies the end of the application process and the beginning of the loan.

Closing Costs:
This is the fees and charges associated with your reverse mortgage. These are usually paid at the closing. Since these fees can be expensive it is common to finance these charges with the reverse mortgage loan.

Comparable's:
This is a term appraisers may use to describe houses they use to determine the value to place on your home. They will use homes in your neighborhood or area that are similar in size and structure.

Deed of Trust:
This is the deed that is recorded with the county to secure your loan.

Depreciation:
This is any loss of the value of your home. This can work to your advantage in a reverse mortgage. Any loss of the value of your home when it sells is absorbed by the lender holding your reverse mortgage.

Equity:
Take the value of your home if you could sell it and minus out any loans or debt you own on it. This is the equity or clear profit of your home. Your reverse mortgage loan amount is based partially on your houses's equity.

Fannie Mae:
Fannie Mae is a government sponsored company that operates privately to buy and sell mortgages.

Federal Housing Administration (FHA}:
They are a branch of the Department of Housing and Urban Development which offers the Home Equity Conversion Mortgage (HECM).

Financing:
Closing costs can run into the thousands. Financing is rolling the closing costs and fees associated with a reverse mortgage into the loan balance.

Fixed rate mortgage:
With an fixed rate mortgage the interest rate does not fluctuate but stays the same throughout the life of the loan. With this type of reverse mortgage loan you always know what your payments will be.

Reverse mortgage:
A home loan that provides seniors with payments - as a lump sum, line of credit, or in monthly installments - that is not payable until you pass away or move out of your home.

Tenure payments:
Equal payments in monthly installments payable through the life of the loan.

Term Payments
Equal monthly payments that are paid over the course of a specified amount of time.

Title:
This is a legal document the proves ownership of a property. When you are applying for any type of mortgage, a title search is performed to ensure there are no liens or claims on the property. This is normal for any type of home mortgage loan.