The reverse mortgage glossary.

A

Adjustable-rate HECM

The common form of the FHA reverse mortgage. Because the rate moves, the loan can offer a line of credit, tenure or term payments, or a combination. The fixed-rate version requires a single lump-sum draw at closing and offers no line of credit, which is why most borrowers who want flexibility end up on the adjustable version.

Amortisation, reverse

On a forward mortgage the balance falls as you pay. On a reverse mortgage nothing is required monthly, so accrued interest and premiums are added to the balance instead and it rises over time. Rising-balance amortisation is the defining mechanic of the product.See also: What it costs

Annual mortgage insurance premium

On a HECM, an ongoing FHA premium that accrues on the outstanding balance for as long as the loan is in place. HUD sets it; no lender discounts it. It is what funds the federal non-recourse guarantee. Proprietary jumbo programs carry no FHA premium.See also: What it costs

Appraisal

The independent valuation of the property that establishes the value used in the calculation. On a HECM the value that goes into the formula is the lesser of the appraised value and the maximum claim amount. On a proprietary jumbo loan it is the appraised value up to the program ceiling.

B

Borrower

A person named on the reverse mortgage note who holds title and occupies the home as a primary residence. On a HECM every borrower must be at least 62; the calculation uses the age of the youngest. A spouse who is not a borrower is a non-borrowing spouse, which is a materially different legal position.

C

Cooling-off period, California

California law requires that seven days pass after counseling before a lender may accept a reverse mortgage application. It is not waivable and it is not something a faster lender can compress. Cal. Civ. Code §1923.2.

Counseling, HUD-approved

Mandatory independent session with a HUD-approved agency of your own choosing, held before a reverse mortgage application can proceed. The counselor works for neither the lender nor the broker. The agency sets its own fee and some reduce or waive it. Required on proprietary programs in California as well as on the HECM.

Credit line growth

The unused portion of a HECM line of credit increases over time at the loan’s compounding rate, by contract, independent of what the home is worth. It cannot be frozen or reduced while the borrower meets the loan obligations. This is the feature that changed how financial planners regard the product.See also: HECM vs. HELOC

Cross-over point

The hypothetical moment at which a rising loan balance would exceed the value of the home. Because reverse mortgages are non-recourse, reaching it does not create a debt for the borrower or the estate: on a HECM, FHA insurance absorbs the shortfall.

D

Deferral period

The period during which an eligible non-borrowing spouse may remain in the home after the borrower dies, without the loan becoming due, provided the conditions of the deferral continue to be met. The rules are specific and worth reading before closing rather than after.

Due and payable

The state a reverse mortgage enters when a maturity event occurs: the last borrower dies, sells, or ceases to occupy the home as a primary residence, or fails to meet the property obligations. Repayment normally comes from the sale of the home or from heirs refinancing it.

E

Eligible non-borrowing spouse

A spouse who is not on the HECM note but who meets HUD’s conditions to remain in the home after the borrowing spouse dies. Eligibility is established at closing, not afterwards, and it depends on identification in the loan documents plus continuing occupancy. The single most important thing to get right on a married HECM file.

Equity

The difference between what the home is worth and what is owed against it. On a reverse mortgage equity falls over time as the balance rises, unless value rises faster. Whatever equity remains at repayment belongs to the borrower or the estate.

Expected rate

A rate figure used at origination to determine how much of the home’s value the loan may access. It is an input to the calculation and is not the same thing as the rate that will be charged on the balance.

F

FHA

The Federal Housing Administration, part of HUD, which insures the HECM. FHA insurance is what makes the HECM’s non-recourse promise a federal guarantee rather than a contractual one.

Financial assessment

The underwriting review of a reverse mortgage applicant’s credit history and capacity to keep up property charges. Introduced after the early years of the program produced too many defaults on taxes and insurance. It is more forgiving than forward-mortgage underwriting but it is not a formality.

First-year disbursement limit

A HUD restriction on how much of the available principal limit a HECM borrower may draw during the first twelve months. It exists to discourage the large single draw that caused problems in the program’s earlier years.

Fixed-rate HECM

A HECM taken as a single lump sum at closing, with a fixed rate and no line of credit, no tenure payment and no future draws. It suits a borrower whose entire purpose is retiring an existing mortgage. For anyone wanting flexibility later it is usually the wrong choice.

G

Growth rate

The rate at which the unused portion of a HECM line of credit increases. See credit line growth.See also: HECM vs. HELOC

H

H4P

Shorthand for HECM for Purchase.See also: HECM for Purchase

HECM

Home Equity Conversion Mortgage: the FHA-insured reverse mortgage, and the only reverse mortgage that carries a federal insurance guarantee. Requires the youngest borrower to be 62 or older. Signed into law in 1988 and made permanent in 1998.See also: How reverse mortgages work

HECM for Purchase

Using a HECM to buy a home rather than to refinance one. The buyer combines a substantial cash contribution with loan proceeds in a single closing, and afterwards no monthly principal and interest payment is required while the property remains their primary residence and the obligations are met.See also: HECM for Purchase

HECM line of credit

The credit-line disbursement option on an adjustable-rate HECM. Draw when you choose; interest accrues only on what is drawn; the unused portion grows over time and cannot be frozen while obligations are met.See also: HECM vs. HELOC

Heirs

Those who inherit the property. On a reverse mortgage they may sell the home and keep whatever equity remains after the balance is repaid, or refinance the balance and keep the house. Because the loan is non-recourse they can never inherit a personal debt from it.

HELOC

A conventional bank home equity line of credit. Requires monthly payments, is recourse debt, and may be frozen or reduced by the lender under its own contract. Genuinely the better tool in several situations, particularly for borrowers under 62 and for short horizons.See also: HECM vs. HELOC

I

Interested party contribution

On a HECM for Purchase, a contribution toward the buyer’s closing costs from a seller, builder, or real estate agent. Capped at 6% of the sales price under FHA Mortgagee Letter 2024-06, which is more generous than most agents expect.See also: HECM for Purchase

J

Jumbo reverse mortgage

A proprietary reverse mortgage designed for homes worth more than the HECM calculation will recognize. Calculates on actual appraised value, carries no FHA insurance, and frequently opens at age 55. Common on California files for exactly that reason.See also: Jumbo reverse mortgages

L

LESA

Life Expectancy Set-Aside: a portion of the principal limit held back to pay property taxes and homeowner’s insurance over time. Required on some files as a result of the financial assessment, and available voluntarily on others. It reduces the cash available but removes the risk that most often ends a reverse mortgage badly.

Lien position

Where a loan sits in the order of claims against a property. A standard reverse mortgage requires first position, which is why existing mortgages are paid off at closing. A second-lien reverse mortgage records behind an existing first instead.See also: Second-lien reverse

M

Maturity event

The event that makes the loan due and payable: the last borrower dies, sells the home, or stops occupying it as a primary residence, or the property obligations go unmet.

Maximum claim amount

The ceiling on the home value the HECM calculation will use: $1,249,125 for FHA case numbers assigned in 2026. One nationwide figure, not a county-by-county limit. A more valuable home is still eligible; the formula simply stops counting above the cap.See also: Jumbo reverse mortgages

Medi-Cal

California’s Medicaid program. Reverse mortgage advances are borrowed money rather than income, but funds still sitting in the bank at month’s end count as an asset for needs-based programs, so the timing of draws matters. A conversation to have with an elder law attorney before anything is signed.

Mortgage insurance premium

The FHA premium on a HECM, charged both upfront at closing and annually on the outstanding balance. Set by HUD.See also: What it costs

Mortgagee Letter

The instrument HUD uses to issue and amend FHA program rules. Reverse mortgage figures that change annually, such as the maximum claim amount, are published this way. Mortgagee Letter 2025-22 sets the 2026 HECM limit.

N

Non-borrowing spouse

A married person who is not on the reverse mortgage note. Their right to remain in the home after the borrower dies depends entirely on whether they qualify as an eligible non-borrowing spouse, which is determined at closing. On a proprietary jumbo loan the protections come from the loan documents rather than from HUD rule, and they are not identical between lenders.

Non-recourse

The borrower and the estate can never owe more than the home is worth at repayment, however large the balance has grown. On a HECM the shortfall is covered by FHA insurance; on a proprietary jumbo loan the protection is written into the loan documents. Both are real; they rest on different foundations.

O

Occupancy certification

A periodic confirmation that the borrower still lives in the home as a primary residence. Failing to return it can start the process toward the loan becoming due, which makes it one of the more consequential pieces of post-closing paperwork.

Origination fee

The lender’s charge for originating the loan. On a HECM, HUD sets a maximum that no lender may exceed. Within that ceiling pricing varies between wholesale lenders, which is the practical case for comparing more than one.See also: What it costs

P

Primary residence

The home the borrower actually lives in, which a reverse mortgage property must be and must remain. An extended absence can trigger a maturity event. Second homes and investment properties do not qualify.

Principal limit

The total amount of loan proceeds available on a given file. A function of the age of the youngest borrower, the expected rate, and the property value the program is willing to recognize. Not the same as the home’s value and typically well below it.

Principal limit factor

The percentage, published by HUD for the HECM, applied to the value in order to arrive at the principal limit. It rises with borrower age, which is why the same house supports a materially larger loan at 75 than at 62.

Proprietary reverse mortgage

A reverse mortgage offered by a private lender rather than insured by FHA. Includes jumbo programs, programs opening at 55, and second-lien products. Terms, protections, and features are set by the lender and differ between programs.See also: Jumbo reverse mortgages

R

Repair set-aside

Funds held back at closing to complete repairs the appraisal requires. Distinct from a life expectancy set-aside, which covers taxes and insurance rather than the condition of the property.

Rescission

The three-business-day period after signing during which a borrower refinancing their own home may cancel. Separate from, and in addition to, California’s seven-day cooling-off period after counseling.

Reverse mortgage

A loan secured by a home that requires no monthly principal and interest payment while the borrower lives there as a primary residence and keeps taxes, insurance, and maintenance current. The balance rises as interest accrues and is repaid when the borrower leaves the home.See also: How reverse mortgages work

S

Second-lien reverse mortgage

A proprietary reverse mortgage recorded behind an existing first mortgage rather than replacing it. Lets a borrower keep a low-rate first mortgage, which they continue paying, while adding a lien that requires no payment of its own.See also: Second-lien reverse

Servicing fee

An ongoing administration charge that some reverse mortgages carry and others do not. Disclosed at origination where it applies, and a line item worth asking about specifically when comparing quotes.

T

Tenure payment

A HECM disbursement option paying a set monthly amount for as long as the borrower lives in the home as a primary residence and meets the loan obligations, regardless of how long that turns out to be.

Term payment

A HECM disbursement option paying a set monthly amount for a fixed number of years chosen at the outset. Larger monthly figures than tenure, but they stop when the term ends.

Title

Ownership of the property. It stays with the borrower on every reverse mortgage, or with their living trust. The lender records a lien, exactly as with any other mortgage. No reverse mortgage program in use today takes title to the home.