What defines a deferred payment loan?

What defines a deferred payment loan?

• A. A loan that requires no payments for the first year
• B. A reverse mortgage that provides funds to repair a home
• C. A loan secured by real estate
• D. A traditional mortgage with fixed payments

Answer: (B)

The correct answer is that a deferred payment loan is best described in the context of a reverse mortgage that provides funds to repair a home. In this type of loan, borrowers are typically not required to make regular monthly payments during the term of the loan. Instead, repayment of the loan occurs when the borrower sells the home, moves out, or passes away. This arrangement allows homeowners, often seniors on a fixed income, to access the equity in their homes to finance repairs or other expenses without the immediate burden of monthly payments. This type of loan is designed to support homeowners by deferring payment obligations, making it easier for them to remain in their homes while addressing necessary repairs or improvements. Most traditional loans, including fixed-rate mortgages, require regular payments regardless of the homeowner's circumstances, which distinguishes deferred payment loans from more standard lending practices.

The correct answer is that a deferred payment loan is best described in the context of a reverse mortgage that provides funds to repair a home. In this type of loan, borrowers are typically not required to make regular monthly payments during the term of the loan. Instead, repayment of the loan occurs when the borrower sells the home, moves out, or passes away. This arrangement allows homeowners, often seniors on a fixed income, to access the equity in their homes to finance repairs or other expenses without the immediate burden of monthly payments.

This type of loan is designed to support homeowners by deferring payment obligations, making it easier for them to remain in their homes while addressing necessary repairs or improvements. Most traditional loans, including fixed-rate mortgages, require regular payments regardless of the homeowner's circumstances, which distinguishes deferred payment loans from more standard lending practices.