Reverse Mortgage

Importance: 0.71

Is a company: no

Is a proper noun: no

Synonyms

  • equity release
  • home equity conversion mortgage
  • reverse-annuity mortgage
  • lifetime mortgage

Alternate Spellings

  • CHIP
  • Home Income

Definition of Reverse Mortgage

  1. A type of loan that allows elderly homeowners to convert built-up equity into cash. The loan comes due if the homeowner sells, moves, or passes away.
  2. An arrangement, often used as part of a retirement plan, in which a homeowner can borrow on the equity held in his or her home causing a negative amortization. Homeowners over the age of 60 can borrow up to 40% of the value of their home and receive monthly tax-free payments from a lender. Also called a lifetime mortgage, reverse-annuity mortgage or home equity conversion mortgage.

Related Terms and Acronyms

  • Active Participant Bank,
    • Actively enrolled in an employer's retirement plan.
  • Annuity Bank,
    • A financial instrument that disperses a number of payments over a set period of time.
    • A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
  • Annuitization Options Bank,
    • The different income dispersal options available when annuitizing a retirement plan or annuity, such as the timeframe and list of beneficiaries.
  • Passive Income Bank,
    • Income coming in on a regular basis, with little or no maintenance.
  • Total Annual Loan Cost (TALC) Bank,
    • A method of finding the annual cost of a reverse loan.
  • Mortgage (mtg) Abbreviation, Important,
    • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • Annuitant Bank,
    • An individual who owns or is the recipient of an annuity.
  • Annuitization Bank,
    • The process of turning a retirement plan or annuity into income in the form of periodic payments or a single lump sum.
  • Empty Nesters Definition,
    • Men or women whose children have grown up and moved out and who might be in the market for a smaller house.
  • Amortization Bank,
    • Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
  • Negative Amortization Bank,
    • A gradual increase in loan debt that occurs when the monthly payment does not cover the entire principal and interest due. The shortfall is added to the remaining balance which creates "negative" amortization.
  • Due-on-sale Clause Bank,
    • A condition of a mortgage that states that the loan must be paid when the house is sold. Commonly used in reverse mortgage lending.
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