Reverse Mortgage Eligibility

  • All reverse mortgage borrowers must be 62 and older
  • Must own property and occupy as primary residence
  • Participate in an information counseling session
  • Must have sufficient equity in the property
  • Property must meet FHA property standards
  • Must maintain home with needed repairs, property taxes and insurance

Loan Amount Based On

  • Age of youngest borrower
  • Current interest rate
  • Lesser of appraised value or the FHA insurance limit
  • An Image Slideshow - Reverse Mortgage Educator
  • An Image Slideshow - Reverse Mortgage Educator
  • An Image Slideshow - Reverse Mortgage Educator

Understanding Reverse Mortgage Terms

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
Appraisal - an estimate of how much a house would sell for if it were sold; also called its market value
Appreciation - an increase in a home's value
Area Agency on Aging (AAA) - a local or regional nonprofit organization that provides information on services and programs for older adults
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
CMT rate - the Constant Maturity Treasury rate, used as an interest rate index in the HECM program
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
Credit line - 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 - in the HECM program, the interest rate currently being charged on a loan. In an adjustable rate loan, this equals one of the HUD-approved interest rate indices (1-month CMT, 1-year CMT, or 1-month LIBOR) plus a margin
Deferred payment loans (DPLs) - reverse mortgages that give you a lump sum of cash to repair or improve a home; usually offered by state or local governments
Depreciation - a decrease in the value of a home
Eminent domain - the right of a government to take private property for public use; for example, taking private land to build a highway
Expected interest rate - in the HECM program, the interest rate used to determine a borrower's loan advance amounts; different than the initial interest rate, it is a calculation of the anticipated average interest rate over the life of the loan
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
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; on an adjustable rate loan, 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"
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) - a program allowing the deferral of payments on property taxes; usually offered by state or local governments
Proprietary reverse mortgage - a reverse mortgage product owned by a private company, as opposed to being insured by the Federal Housing Administration
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 rescission - a borrower's right to cancel a refinance 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
 
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