Reverse mortgage glossary

The terms you'll hear, in plain English.

HECM

Home Equity Conversion Mortgage. The reverse mortgage insured by the FHA, and the most common type.

Proprietary reverse mortgage

A privately offered reverse mortgage, often for higher-value homes. Sometimes called a jumbo reverse mortgage.

HECM for Purchase

A HECM used to buy a new primary residence in one transaction.

Non-recourse

You or your heirs never owe more than the home is worth when the loan is repaid.

Maximum claim amount

The lesser of the home's appraised value or the FHA lending limit. Used to figure costs and available funds.

Principal limit

The total amount you can borrow, based on the youngest borrower's age, rates and the maximum claim amount.

Mortgage insurance premium (MIP)

FHA insurance: 2% upfront and 0.5% a year. It makes the loan non-recourse.

Line of credit

A payout option where unused funds remain available and grow over time on adjustable-rate HECMs.

Tenure payment

Fixed monthly payments for as long as you live in the home.

Term payment

Fixed monthly payments for a set number of months.

Financial assessment

A review of your income, credit and expenses to make sure you can keep up property charges.

LESA

Life Expectancy Set-Aside. Part of the loan reserved to pay property taxes and insurance.

Eligible non-borrowing spouse

A spouse not on the loan who may be able to stay in the home after the borrower passes, if requirements are met.

Due and payable

When the loan must be repaid, such as after the last borrower passes or moves out permanently.

Deed in lieu

Signing the home over to the lender to settle the loan, with nothing more owed.

HUD-approved counselor

An independent housing counselor every HECM borrower must meet with before applying.