Reverse Mortgages have a lot of terms associated with them. For all of us in the business they are used in normal conversations and sometimes we forget that it may sound like we are speaking a foreign language to someone not familiar with Reverse Mortgages. My goal today is to give you a quick education on the different terms associated with a Reverse Mortgage. Here we go!
www.truthaboutFHAreversemortgages.com
HECM..This is a common term and it stands for Home Equity Conversion Mortgage. It is very good definition of what you are actually doing with a Reverse Mortgage. The client is converting equity in their home into cash or credit.
FHA..I know this may seem like an easy one. But, I am surprised at how many people are not familiar with this term. FHA = Federal Housing Administration. An FHA loan is a "mortgage issued by federally qualified lenders and insured by the FHA."
Non-recourse.. You often here the term "non-recourse" loan when you hear about a reverse mortgage. Here is the definition: "A type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan." This is great for heirs!
Libor Loan..London Interbank Offered Rate. You often see this term on a comparison of options for a reverse mortgage. It is associated with an Adjustable rate option for a reverse mortgage. Adjustable rate Reverse Mortgage is a choice for people that do not want all of their equity now, but would rather have access to it via a line of credit.
LOC.. This is a term often used with an adjustable reverse mortgage. It stands for Line Of Credit. It is like having a credit card on your home. You can access the money when you need it.
These are some of the common terms associated with a reverse mortgage. I want to end with an explanation of a Reverse Mortgage in laymen's terms. It is simply a loan offered by lenders for people over the age of 62. If the borrower is eligible and qualified then it is attached to a primary residence. The loan does accrue interest every year at a fixed or an adjustable rate. There are no payments made by the borrower. There is no credit or income requirements. It is an FHA insured loan and is non-recourse loan.
If you have any questions or you would like to inquire about a Reverse Mortgage. Please email me or call me direct.
Sincerely,
www.truthaboutFHAreversemortgages.com
Noah S. Burford
noahb4@gmail.com 949-278-9244
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