What type of mortgage allows the lender to make periodic payments to the borrower using the borrower's equity in their home?

What type of mortgage allows the lender to make periodic payments to the borrower using the borrower's equity in their home?

• A. Reverse Mortgage
• B. Fixed-Rate Mortgage
• C. FHA Loan
• D. Conventional Loan

Answer: (A)

A reverse mortgage is a type of home loan that allows homeowners, typically older adults, to convert a part of the equity in their home into cash. Unlike traditional mortgages where the borrower makes monthly payments to the lender, in a reverse mortgage, the lender makes periodic payments to the borrower based on their home equity. This type of financing is designed to provide additional income to retirees by leveraging the value they've built up in their homes, allowing them to receive funds that can be used for various expenses, such as healthcare or living costs, while still residing in their home. Fixed-rate mortgages, FHA loans, and conventional loans do not provide this feature of making payments to the borrower based on home equity. Instead, they require borrowers to make regular payments to the lender, generally for the purpose of paying down the loan principal and interest over time. In contrast, a reverse mortgage operates under a different principle focused on tapping into home equity without the borrower needing to pay back the loan until they move out of the home, sell it, or pass away.

A reverse mortgage is a type of home loan that allows homeowners, typically older adults, to convert a part of the equity in their home into cash. Unlike traditional mortgages where the borrower makes monthly payments to the lender, in a reverse mortgage, the lender makes periodic payments to the borrower based on their home equity. This type of financing is designed to provide additional income to retirees by leveraging the value they've built up in their homes, allowing them to receive funds that can be used for various expenses, such as healthcare or living costs, while still residing in their home.

Fixed-rate mortgages, FHA loans, and conventional loans do not provide this feature of making payments to the borrower based on home equity. Instead, they require borrowers to make regular payments to the lender, generally for the purpose of paying down the loan principal and interest over time. In contrast, a reverse mortgage operates under a different principle focused on tapping into home equity without the borrower needing to pay back the loan until they move out of the home, sell it, or pass away.