Home Equity: The value of the home minus the money still owed on mortgages or loans. If borrowers sell their home, home equity is the money they get after paying off loans.
HomeSafe Second: A special reverse mortgage placed as a second lien behind borrowers’ current mortgage. It helps borrowers get extra cash without changing their first mortgage.
Loan Balance: The total amount of money borrowers owe on the loan. It grows as interest adds up or as initial draws are taken.
Loan-to-Value (LTV) ratio: For reverse mortgages, the Loan-to-Value (LTV) ratio helps determine how much borrowers can get when the loan closes. It’s based on the home’s current appraised value, youngest borrower’s age and interest rate.
Non-recourse loan: A loan where borrowers or their heirs won’t owe more than the home’s worth when it’s sold to repay the loan.
Principal Limit: The most money borrowers can get from a reverse mortgage. It’s based on age, home value, and interest rates.
Principal: A sum of money that is lent and on which interest is paid.
Reverse mortgage:A special loan for homeowners aged 55+ that lets borrowers use home equity without needing to make monthly loan payments¹.
Second lien (or Second mortgage): A second loan taken in addition to a first mortgage. The second lien gets repaid after the first mortgage when the home is sold.
¹The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, and hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For tax advice, please consult a tax professional. For more information about whether a reverse mortgage fits into your retirement strategy, you should consult your financial advisor.
