Glossary
Reverse mortgage
A loan for homeowners 62+ that pays you from your home equity instead of the other way around — repaid when you sell, move out, or pass away.
A reverse mortgage flips a normal mortgage: instead of you paying the lender each month, the lender pays you — as a lump sum, monthly payments, or a line of credit — drawn against your home's equity. No monthly repayment is required while you live in the home as your primary residence, but interest accrues and the balance grows over time. The loan comes due, with interest, when you sell, move out permanently, or die, at which point the home (or your estate) settles the debt, usually by selling the property.
Related terms
- Origination fee An upfront charge (0–8% of the loan) deducted before funds reach you. A $10,000 loan with a 5% fee delivers $9,500 — but you repay all $10,000.
- Prepayment penalty A fee some lenders charge for paying a loan off early. Rare on consumer loans, common in commercial lending — always check the note.
- Lien A legal claim against property that secures a debt — the lienholder can force a sale to collect if the debt goes unpaid.
- Credit utilization ratio The share of your available revolving credit you are currently using — the second-biggest factor in your credit score, after payment history.
- Soft credit check A credit check that does not affect your score — used for pre-qualification, background checks, and checking your own report.
- Underwriting The process a lender uses to verify your income, assets, debts, and credit before approving a loan — the "yes or no" behind every offer.