HECM- The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM). If you are a homeowner age 62 or older and have paid off your mortgage or paid down a considerable amount, and are currently living in the home, you may be able to participate in FHA’s HECM program.You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. This HECM is often referenced as the H4P program.
H4P- This is the abbreviation for the HECM for Purchase program.
Home Equity- Home equity is the market value of a homeowner’s unencumbered interest in their real property, that is, the difference between the home’s fair market value and the outstanding balance of all liens on the property. The property’s equity increases as the debtor makes payments against the mortgage balance, or as the property value appreciates. In economics, home equity is sometimes called real property value.
Proceeds- How much money one makes from the sale of an item. Example: You sold your home for $100,000, paid off the bank loan that was $50,000 leaving you with $50,000 in proceeds.
Mortgage Loan- A mortgage loan or, simply, mortgage is used either by purchasers of real property to raise funds to buy real estate, or alternatively by existing property owners to raise funds for any purpose, while putting a lien on the property being mortgaged. The loan is “secured” on the borrower’s property through a process known as mortgage origination. This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property (“foreclosure” or “repossession”) to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms.
Interest Rate- An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited or borrowed. It is defined as the proportion of an amount loaned which a lender charges as interest to the borrower, normally expressed as an annual percentage.It is the rate a bank or other lender charges to borrow its money, or the rate a bank pays its savers for keeping money in an account.
Line of Credit- a credit source extended to a government, business or individual by a bank or other financial institution. It is effectively a source of funds that can readily be tapped at the borrower’s discretion. Interest is paid only on money actually withdrawn. Lines of credit can be secured by collateral, or may be unsecured. Lines of credit are often extended by banks, financial institutions and other licensed consumer lenders to creditworthy customers (though certain special-purpose lines of credit may not have creditworthiness requirements) to address liquidity problems; such a line of credit is often called a personal line of credit.
Jumbo Mortgage- In the United States, a jumbo mortgage is a mortgage loan that may have high credit quality, but is in an amount above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises, Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders, allowing them to free up liquidity to lend more mortgages. When FNMA and FHLMC limits don’t cover the full loan amount, the loan is referred to as a “jumbo mortgage”.
Proprietary Reverse Mortgage- a loan that let’s senior homeowners retrieve the equity in their homes through a private company. They are not federally insured and not bound by traditional lending limits.