Reverse Mortgage Glossary

• acceleration clause - A legal clause that allows the note holder to declare the loan or note due and payable.
• adjustable rate loan - A loan with an interest rate that can change based on a combination of market rate indexes and margins.
• appraisal - A certified estimate of a home's worth. There are 3 main methods of determining the home's worth, also know as the home's market value: Income Approach, Sales Comparison Approach, Cost Approach.
• appreciation - The increase in the market value of a home.
• cap - The maxmium limit on how much an interest rate may increase or decrease during the lifetime of a loan.
• closing - One of the last steps to close the deal where all the documents are signed where the official where the buyer officially becomes the owner of the property.
• CMT rate - Constant Maturity Treasury rate, which is an interst rate index used for reverse mortgages.
• deferred payment loans - A type of reverse mortgage where the borrower receives a lump sum of cash offered by the government to fix up a home.
• depreciation - The decrease in the market value of a home.
• expected interest rate - In the context of a HECM, used to determine how much a borrower receives and is determined based off a few indexes, the 10-year CMT or the 10-year LIBOR plus a margin.