When a senior obtains a quote on a reverse mortgage for their home in California, it may often look like a page full of numbers that don't make much sense. This article will explain the reverse mortgage quote so that the senior homeowner, their heirs and advisors, can understand it and make a good decision about the terms that are offered.

A California reverse mortgage quote should not be confused with the results produced from one of the many available online reverse mortgage calculators. These online calculators are useful in that they, in an instant, can tell the senior whether they are likely to qualify for a reverse mortgage. If so, they will reveal how much money they qualify for and in what forms that they can receive it. But the figures that online calculators generate do not answer many questions such as closing costs, interest rate details, and whether the programs presented are the best of all available choices.

A reverse mortgage quote should contain a number of key elements. It should compare, in side-by-side columns, at least three California reverse mortgage programs. Under each column, will be a list of line items that define the basic financial terms of the loan. Different lenders use slightly different quote forms, so this article will cover all the commonly-listed terms, each of which may or may not appear on your particular quote.

1. Program Name. There are over 20 reverse mortgage programs available in California, so be aware that you are looking at just a small sampling of them.
2. Interest Rate. All but two reverse mortgages carry adjustable rates, so this section will show you the interest rate index and the margin that is added to the index to get your total interest rate. The index is either the 6 Month Treasury Index or the LIBOR which are commonly used indexes for mortgage loans. The margin is essentially the profit that the lender makes on the interest rate.
3. Mortgage Insurance. In addition to the interest rate, all FHA reverse mortgage products tack on one half of one percent (0.5%) for ongoing mortgage insurance. This effectively increases the interest rate by that amount and does not change from lender to lender.
4. Expected Interest Rate. This is the total rate (excluding mortgage insurance) calculated by adding the margin to the long-term index, such as the 10 year Treasury. It represents a reasonable estimate of the average rate you can expect to see over the long run.
5. Interest Rate Cap. This cap is calculated by adding a given number of points to the starting interest rate.
6. Credit Line Growth Rate. If the reverse mortgage will have a line of credit component, then this is the annual percentage by which the ceiling on the credit line will increase. Think of it like your credit card company increasing your spending limit, only doing it automatically.
7. Monthly Service Fee. This is the amount of money that will be added to your loan balance each month to pay the company for record keeping, for the call center and to send you monthly statements.
8. Estimated Home Value. The amount you tell your lender that you think your home is worth. This number will be adjusted by an appraisal.
9. Lending Limit. This is the amount of home value that the program recognizes in calculating your principle limit and often varies by county. If your home is worth more than the limit, then the excess is ignored.
10. Principle Limit. This is the maximum gross loan amount that this reverse mortgage program will offer and is based on the age of the homeowners.
11. Service Fee Set-Aside. This is the total amount of the Monthly Service Fees projected into the future for the homeowner's actuarial lifetime. It reduces the principle limit for the purpose of calculating the figures that follow, but is only charged in the future at the monthly rate.
12. Mortgage Insurance Premium. If charged on this program, this is a non-negotiable fee for FHA reverse mortgage insurance.
13. Origination Fee. This pays the lender/broker for their work.
14. Other Costs. An estimate of the total of title, escrow, appraisal, notary, loan docs, credit check and other fees charged in connection with your loan.
15. Net Principle Limit or Cash Available. The amount of money available after deducting the line items above.
16. Debt Payoff. The total amount of liens on the home to be paid off by the reverse mortgage. Note that no unpaid liens may remain on the home.
17. Cash Draw. The lump sum amount that may be received at closing of the reverse mortgage.
18. Credit Line. The amount of credit line available.
19. Tenure Payments. If the cash draw and credit line are zero, this is the maximum monthly amount the lender will pay for as long as the senior keeps the loan.
20. Total Fees and Costs. The sum of the Origination Fee, Mortgage Insurance Premium and Other Costs, that are usually financed in the loan.

With this information, most reverse mortgage quotes will make sense. Seniors who live in California are well advised that a comparison of three programs is probably not sufficient due the high home values and number of programs available. Ask your lender for a quote on at least six programs to be sure that you get the best possible quote.