Final answer:
A reverse mortgage is a type of Home Equity Loan, and assessing the mortgage interest rates can help determine whether it's more beneficial to be a lender or a borrower during certain years based on economic conditions.
Step-by-step explanation:
A reverse mortgage is a type of consumer lending product known as a Home Equity Loan. It allows homeowners, typically seniors, to borrow money against the value of their home, with the loan being repaid when the homeowner sells the house, moves out, or passes away. From the options provided, a reverse mortgage most closely aligns with Option 2: Home Equity Loan. Unlike traditional mortgages, a reverse mortgage does not require the homeowner to make monthly payments to the lender; instead, the lender makes payments to the homeowner, either through a lump sum, fixed monthly payments, or a line of credit.
Mortgage loans are assets for banks, as borrowers have a legal obligation to repay over an agreed period, typically 30 years. Mortgages can be sold in the secondary loan market, where their present value can be estimated by what other parties are willing to pay for them. This is important to understand as the value of these loans can fluctuate based on the mortgage interest rate and the rate of inflation during the years of repayment.