Reverse Mortgage Jargons


Jargon You Need to Understand

This depends on factors like: If you hate reading about finance because you cannot understand the jargon, you are not alone. We appreciate that you do need to know exactly what reverse mortgage is without sweat. So we are going to explain a few terms that will help you understand the concept of reverse mortgage:

  • Mortgage Loan – When you want to buy a home and you’re short of cash, you take a loan. Your lender immediately pays the seller the full amount for the home you are buying. You then owe the lender the total amount borrowed, with interest and fees added on. You pay off the loan using EMIs (Easy Monthly Installments) over an extended period of time.
  • Home Equity – The difference between the market value (appraised value) of your home and the outstanding balance you still have to pay the lender for your home. To calculate your equity, simply subtract the amount of the mortgage balance from the current market value of your home.
    • For example, if your home has been appraised for $250,000 and you still have to repay $ 75,000, your equity is $175,000. The higher the equity of your home, the better for you. Remember, if you have paid off the full amount of your mortgage, the present market value of your home is your equity
  • Income-to-Debt Ratio – The difference between the total amount you have borrowed and your income. The lower this difference, the better for you.
  • Second Mortgage – In the most common type of second mortgage, you may borrow up to the amount of equity you have in your home. For example, if you have a home valued at $200,000 and you currently owe $125,000 on the first mortgage you used to buy your home, you could take out a second mortgage for $75,000. With a normal second mortgage, you must have sufficient income-to-debt ratio to qualify for the loan, and you are also required to make monthly mortgage payments.

For more information on Reverse mortgage, we suggest you visit

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useful for further reference.