My Financial Healthcheck

Adjustable rate – an interest rate that changes, based on changes in a published market-rate index.

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

Appreciation – an increase in a home’s value.

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.

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 – in the HECM program, 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) – 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.

Expected interest rate – in the HECM program, 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.

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.

Initial interest rate – in the HECM program, 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 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.