What is “reverse mortgage”?

A reverse mortgage is a financial product specifically designed to allow homeowners, typically older adults, to convert a portion of the equity in their home into cash. This type of loan enables borrowers to access their home equity while still retaining ownership and the right to live in the home. The funds can be used for various needs such as retirement income, healthcare expenses, or home improvements, and repayments are generally not required until the homeowner moves out, sells the home, or passes away.

This approach provides financial flexibility and can enhance cash flow for those who may have limited income but own valuable assets like their home. It's important for borrowers to fully understand the implications of a reverse mortgage, including how it can affect their estate, as the loan must be repaid when the homeowner no longer occupies the property.

The other options do not accurately describe a reverse mortgage. For instance, a mortgage for first-time home buyers involves traditional lending practices where borrowers must make monthly payments and typically contributes towards building equity from the start. A standard home loan with higher interest rates does not reflect the unique characteristics of reverse mortgages, which do not require repayment until certain conditions are met. Lastly, a loan that requires upfront payments and incurs no equity does not align with the concept of a reverse mortgage,