1,401,176 HECM reverse mortgages insured by FHA since 1989.
Your reverse mortgage options in about 2 minutes. No Social Security number or credit check.
Reverse mortgage guide
Reverse mortgages come with their own vocabulary, and a few common words get used the wrong way. This glossary explains more than 100 terms you'll see in your estimate, your counseling session, and your loan documents, in plain English. Each definition refers to the FHA-insured HECM unless it says otherwise, because proprietary (jumbo) programs set their own rules. If a word in your paperwork isn't here, ask me and I'll explain it.
I've put the terms in alphabetical order, grouped by letter. Most entries link to a full guide if you want the deeper story. Numbers come first.
95 percent rule. When a HECM comes due and the home is worth less than the loan balance, the home can generally be sold to satisfy the loan for the lesser of the balance or 95 percent of the current appraised value, and heirs who want to keep it can generally pay that same amount. FHA insurance covers any shortfall. See Reverse Mortgages and Heirs.
150 percent recorded amount. The dollar figure printed on your note and deed of trust. In states that require a maximum amount on the recorded documents, HUD requires it to be at least 150 percent of the maximum claim amount, so your balance has room to grow. It is not what you owe. See Why Reverse Mortgages Have 2 Notes and 2 Deeds of Trust.
Adjustable-rate HECM. A HECM whose interest rate moves with a published index. It's the version that offers a line of credit, monthly payouts, or a mix. See Fixed vs. Adjustable.
Age (youngest borrower). For a HECM, every borrower must be at least 62. The math uses the age of the youngest borrower or eligible non-borrowing spouse, and older ages generally mean more money available.
Amortization schedule. A projection of how your loan balance could grow over time. On a reverse mortgage, it runs in reverse of a regular loan: the balance goes up, and equity goes down.
Annual mortgage insurance. The ongoing FHA insurance charge on a HECM, figured on your balance and added to it each month. See Reverse Mortgage Costs for the current figure.
Annual adjustable. An adjustable HECM whose rate can change once a year, within caps. See Caps.
Appraisal. An FHA appraiser's opinion of your home's value and condition. It sets the value used in your loan and flags any required repairs. See Is there a situation where I would need 2 appraisals?
Assignment. When a HECM's balance reaches 98 percent of the maximum claim amount, or a payment you request would take it to 100 percent, the lender may choose to assign the loan to HUD if the loan meets HUD's conditions. You keep the same terms, and HUD takes over any future advances.
Balance (loan balance). What you actually owe: the money you've received, plus interest, mortgage insurance, and any financed costs. It's on your monthly statement.
Borrower. A person on the loan and on the title. Borrowers can draw money from the loan. Compare Non-borrowing spouse.
Broker. A company that compares loans from several lenders and helps you choose, rather than lending its own money. ZYNG Mortgage is a broker.
California 7-day wait. In California, a lender can't take a complete reverse mortgage application or charge fees until 7 days after you finish counseling. See Why do I need to wait 7 days after counseling?
Caps. Limits on how far an adjustable rate can move. Annual adjustable HECMs are capped at 2 points per year and 5 points over the life of the loan, and HUD allows monthly adjustable HECMs a lifetime cap of up to 10 points. The monthly adjustable HECMs we offer have a 5-point lifetime cap. See Reverse Mortgage Rates.
Cash for keys. A HUD incentive that can be offered to occupants who move out and leave the home in good condition when a loan comes due, within set time limits.
CMT (Constant Maturity Treasury). A Treasury index published by the U.S. Treasury. Most adjustable HECMs today use a CMT index for the note rate, and ours use the 1-year CMT. The 10-year CMT is used for the expected rate.
Closing. The day you sign your final loan documents. On a refinance of your home, money isn't released until the rescission period ends. See Right of rescission.
Closing costs. Third-party charges like title, escrow, appraisal, recording, and credit report fees. They can usually be paid from the loan. See Reverse Mortgage Costs.
Co-borrower. A second borrower on the loan, usually a spouse who is also 62 or older. Both can draw money, and the loan doesn't come due until the last one leaves.
Collateral risk assessment. FHA's review of HECM appraisals. If the review flags the value, a second appraisal is required, and the lower value is used.
Compensating factors. Strengths in your finances that can make up for residual income that comes in short during the financial assessment, such as savings large enough to cover your property charges. See Financial Assessment.
Condo approval. A HECM on a condo generally requires FHA approval of the project, or approval of the individual unit. Some proprietary programs accept condos that aren't FHA-approved.
Counseling. A required session with an independent, HUD-approved counselor before you apply for a HECM. A non-borrowing spouse must attend too. See Reverse Mortgage Counseling.
Counseling certificate. Proof that you completed counseling. It's generally good for 180 days. See When does a counseling certificate expire?
Deed in lieu of foreclosure. Handing the home over to the lender to satisfy the loan, instead of selling it. It's an option for heirs when there's no equity left, and they don't owe anything out of pocket on a HECM.
Deed of trust. The document that ties the loan to your home. Some states call it a mortgage. Adjustable-rate HECMs have two; fixed-rate HECMs usually have one.
Deferral period. The period after the last borrower dies when an eligible non-borrowing spouse can keep living in the home without the loan coming due. No more money is paid out during it. See the Non-Borrowing Spouse guide.
Disbursement. Money paid out of the loan, to you or on your behalf, such as a mortgage payoff at closing.
Due and payable. When the loan must be repaid. That usually happens when the last borrower (or eligible non-borrowing spouse) dies, sells, or moves out for good, including being away more than 12 months in a row for health reasons, or when the loan terms aren't met.
Due and payable notice. The letter the servicer sends when the loan comes due. Heirs generally have 30 days to respond and six months to sell or pay off the loan, with up to two 90-day extensions if they're working on it.
Eligible non-borrowing spouse. A spouse who isn't on the loan but meets HUD's requirements: married to the borrower at closing and for the rest of the borrower's life, named in the loan documents, and living in the home. They get the deferral period. See What is an eligible non-borrowing spouse?
Equity. Your home's value minus what you owe on it.
Expected rate. The rate HUD uses to figure how much money you can access. On an adjustable HECM, it's the 10-year CMT plus your margin, with a HUD floor. A lower expected rate generally means more money.
Extensions. Extra time HUD can approve, at the servicer's request, for heirs to sell or pay off a loan, generally in 90-day steps when they're actively working on it.
Extenuating circumstances. Events outside your control, like a serious illness, a job loss, or a death in the family, that can explain past credit or payment problems during the financial assessment.
FHA (Federal Housing Administration). The part of HUD that insures HECMs. FHA doesn't make loans. Lenders do, and FHA insures them.
Financial assessment. The lender's review of your credit, income, and history of paying property taxes and insurance, required on HECMs since April 27, 2015. See Reverse Mortgage Financial Assessment.
First-year limit (initial disbursement limit). HUD limits how much you can take in the first 12 months, generally 60 percent of the principal limit, or more if you need it to pay off your mortgage and other required costs.
Fixed-rate HECM. A HECM with one rate for life, paid out as a single draw at closing. No line of credit. See Fixed-Rate Reverse Mortgages.
Flood insurance. Required on a HECM if your home is in a FEMA Special Flood Hazard Area. It's a property charge, like taxes and homeowners insurance.
Full draw. Taking all available money at closing. Fixed-rate HECMs work this way.
Growth (line of credit growth). On an adjustable HECM, the unused part of your line of credit grows over time, at the same rate as your loan balance. Here's my pet peeve: people say the line "earns interest." It doesn't. It grows, which means you can borrow more later, but nobody is paying you interest. See Standby Line of Credit Strategy.
H2H (HECM to HECM refinance). Refinancing an existing HECM into a new one, usually to access more money after home values or limits rise. You may get credit for mortgage insurance you've already paid. See Reverse Mortgage Refinance.
HECM (Home Equity Conversion Mortgage). The FHA-insured reverse mortgage. It's what most people mean when they say "reverse mortgage." See HECM Reverse Mortgage.
HECM for Purchase. A HECM used to buy your next home, combined with a down payment, so there are no required monthly mortgage payments afterward. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. See HECM for Purchase.
HECM Saver and HECM Standard. Two older versions of the HECM with different upfront costs. HUD ended both in 2013 and replaced them with today's single program. If you see these terms, you're reading an old article. See HECM Program Changes by Year.
Heirs. The people who inherit your estate. When the loan comes due, they can sell the home and keep any equity, keep the home by paying off the loan, or hand it over. See Reverse Mortgages and Heirs.
HOA dues. Homeowners association fees. You must keep paying them with a reverse mortgage, and they aren't paid from a LESA.
Home Keeper. A reverse mortgage Fannie Mae used to offer. It was discontinued years ago. Another sign you're reading an old article.
HUD (U.S. Department of Housing and Urban Development). The federal agency that runs the HECM program through FHA and approves housing counselors. ZYNG isn't affiliated with HUD or FHA.
Income vs. proceeds. This one matters. Income is money you keep. Reverse mortgage money is loan proceeds, which get repaid with interest and mortgage insurance. Calling it income is wrong, and it confuses people about taxes and benefits. Loan proceeds are generally not taxable income and generally don't affect Social Security or Medicare. Needs-based programs like Medicaid and SSI can count money you hold, so check before you draw large amounts.
Index. The published market rate an adjustable HECM is tied to, like the CMT or SOFR. Your rate is the index plus your margin.
Ineligible non-borrowing spouse. A spouse who is identified at closing but doesn't meet HUD's requirements, most often because they don't live in the home. They don't get the deferral period, and their age isn't used in the math. See What is an ineligible non-borrowing spouse?
Initial interest rate. The starting rate on an adjustable HECM, set at closing as the index plus the margin.
Interest. The cost of borrowing. On a reverse mortgage, it's added to your balance each month instead of paid, so it compounds. You pay interest only on money you've actually drawn.
Interested party contributions. Money a seller, agent, or builder can put toward your costs on a HECM for Purchase, up to 6 percent of the price, for certain costs only. See The Purchase Reverse Mortgage Guide for Real Estate Professionals.
Jumbo reverse mortgage. Another name for a proprietary reverse mortgage. See Proprietary reverse mortgage.
LESA (Life Expectancy Set-Aside). Part of your loan set aside to pay property taxes and insurance for you, if the financial assessment requires it or you choose it. A fully funded LESA pays those bills for you. A partially funded LESA supplements your own payments. A LESA isn't a denial. It just lowers the money available for other things.
Lending limit. The highest home value HUD will use in a HECM calculation, set each year. A home worth more still qualifies. Only the value counted is capped. See HECM Lending Limits.
LIBOR. An old index many adjustable HECMs used to follow. It's retired. New HECMs moved to the CMT or SOFR, and older LIBOR loans were moved to a SOFR-based index after June 30, 2023.
Lien. A claim against your home that secures a debt, like a mortgage, a HELOC, or a tax lien. Existing liens must be paid off at or before a HECM closing.
Lien seasoning. HUD's rule on recent liens. A non-HECM lien opened within 12 months before your application generally can't be paid off with HECM money if it gave you $500 or more in cash, at closing or through later draws. See Lien Seasoning Requirements.
Line of credit. Money you can draw when you need it. On an adjustable HECM, the unused part grows, and the lender can't freeze or reduce it as long as you meet the loan terms. See HECM vs. HELOC.
Loan Estimate. The standard form showing your loan's terms and costs, sent after you apply. Read it next to the TALC disclosure.
Lump sum. Taking money all at once at closing.
Mandatory obligations. Costs that must be paid at closing, like an existing mortgage and closing costs. They're part of the first-year limit math.
Manufactured home. Can qualify for a HECM if it was built after June 15, 1976, sits on a permanent foundation, is classified as real property, and meets HUD's standards. The proprietary (jumbo) programs we offer don't accept manufactured homes.
Margin. The part of an adjustable rate set by the lender. It's added to the index and never changes. When you compare adjustable quotes, compare margins.
Maturity. When the loan comes due. See Due and payable.
Maximum claim amount. The lesser of your home's appraised value, the purchase price (on a HECM for Purchase), or the HECM lending limit. It's the value used to figure your principal limit.
MOE (Mortgagee Optional Election) assignment. A way for lenders to assign certain older HECMs, with case numbers before August 4, 2014, to HUD so a qualifying surviving spouse can stay in the home. It's the lender's option, not a right. See the Non-Borrowing Spouse guide.
Modified tenure. Monthly payouts for as long as you live in the home, plus a line of credit.
Modified term. Monthly payouts for a set number of years, plus a line of credit.
Monthly adjustable. An adjustable HECM whose rate can change monthly, with a lifetime cap but no yearly cap.
Mortgage insurance premium (MIP). FHA's insurance on a HECM: an upfront premium at closing and an annual premium on your balance. It pays for the non-recourse protection and for HUD to keep making advances if a lender can't. See Reverse Mortgage Costs for current figures.
Mortgagee Letter. An official notice from HUD that sets or changes FHA and HECM rules. You'll see them cited as "ML" with a year and number.
Net principal limit. What's left for you to use after your mortgage payoff, closing costs, and any set-asides come out of the principal limit.
Non-borrowing spouse. A spouse who isn't on the loan, usually because they're under 62. They can be eligible or ineligible. See the Non-Borrowing Spouse guide.
Non-recourse. On a HECM, if the home sells for less than the loan balance, you and your heirs don't pay the difference. FHA insurance covers it. See Are reverse mortgages non-recourse loans?
Note. Your written promise to repay. Adjustable-rate HECMs have two: a first note for the lender and a second note in favor of HUD. Fixed-rate HECMs, which pay out in one lump sum, no longer need the second note.
Occupancy certification. A form you return each year to confirm you still live in the home. Don't ignore it. A missed certification can start a due and payable process. See Why did I get an occupancy certification?
Origination fee. The fee for setting up your loan. On a HECM, HUD caps it with a formula based on your home's value. See Reverse Mortgage Costs.
Payment plan. How you choose to receive your money: lump sum, tenure, term, line of credit, or a mix. On an adjustable HECM, you can generally change it later for a small fee.
Prepayment. Paying down your balance early. You can make voluntary payments on a HECM at any time without a penalty.
Primary residence. The home you live in most of the year. A HECM has to be on your primary residence, and you have to keep living there.
Principal limit. The total amount available from a HECM, based on the youngest borrower's or eligible non-borrowing spouse's age, the expected rate, and the maximum claim amount. See How a Reverse Mortgage Works.
Principal limit factor. The percentage HUD's tables give for your age and expected rate. Multiply it by the maximum claim amount and you get the principal limit.
Property charges. Property taxes, homeowners insurance, flood insurance if required, and HOA dues. You must keep paying them with any reverse mortgage.
Property tax deferral. A state or county program that lets some older homeowners put off property taxes. HUD rules don't let a HECM borrower take part in a property tax deferral program unless its lien is subordinate to the HECM, so check before you apply for either.
Proprietary reverse mortgage. A private reverse mortgage that isn't insured by FHA, usually used on higher-value homes. Each program sets its own rules, ages, and limits. See Proprietary (Jumbo) Reverse Mortgages.
Rate lock. On an adjustable HECM, the expected rate can generally be locked when your FHA case number is assigned, for up to 120 days.
Repair set-aside. Money held back from your loan to finish repairs the appraiser required, when they can be done after closing.
Residual income. What's left each month after your regular expenses. The financial assessment compares it with HUD's guidelines for your family size and region.
Reverse mortgage. A loan for homeowners 62 and older (for a HECM) that turns part of your home equity into money, with no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. See the Reverse Mortgage Guide.
Right of rescission. Your right to cancel most loans secured by the home you live in, other than a purchase loan, generally by midnight of the third business day after closing, or later if you get the required notices late. It doesn't apply to a HECM for Purchase.
Second appraisal. A second FHA appraisal required when the collateral risk assessment flags the first one. The lower value is used. ZYNG often covers the cost.
Servicer. The company that manages your loan after closing. It sends statements, handles draws, and sends the annual occupancy certification.
Servicing fee. A monthly fee some loans add to the balance. HUD allows one on a HECM, but ZYNG chooses not to charge it on HECMs. Some proprietary programs do charge one.
Set-aside. Money reserved from your principal limit for a specific purpose, like a LESA or a repair set-aside.
SOFR (Secured Overnight Financing Rate). An index HUD approved for annual adjustable HECMs when LIBOR was retired.
Standby line of credit. A HECM line of credit opened early and mostly left alone, so it can grow and be ready for emergencies, a market drop, or care later. See Standby Line of Credit Strategy.
Statement. Your monthly loan statement. It shows your real balance, your available line of credit, and what was added that month.
TALC (Total Annual Loan Cost). A required disclosure showing the projected yearly cost of the loan over different time periods and home value growth rates. It shows why upfront costs matter more on a short loan. See What Is the TALC?
Tenure payments. Monthly payouts for as long as you live in the home and meet the loan terms, even if the money would otherwise run out.
Term payments. Monthly payouts for a set number of years that you choose.
Title. Legal ownership of your home. With a reverse mortgage, you keep title. See Do I still own my home if I get a reverse mortgage?
Upfront mortgage insurance. FHA's one-time insurance charge at closing on a HECM, based on the maximum claim amount. It can usually be paid from the loan. See Reverse Mortgage Costs.
Unused line of credit. The part of your line of credit you haven't drawn. You don't pay interest on it, and on an adjustable HECM it grows over time.
Voluntary payments. Payments you choose to make to lower your balance. They aren't required. On an adjustable HECM line of credit, money you pay back generally becomes available to draw again.
If a word in your paperwork isn't here, or something here doesn't match what you were told, ask. I'd rather explain it twice than have you sign something you don't understand. Call us at 530-888-6000, browse Reverse Mortgage Questions, or read the Reverse Mortgage Guide.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).
