Question

A loan available to a person 62 or older that allows him or her to convert some home equity into cash and receive periodic payments. It is payable when the borrower dies, moves out, or the property is sold.

True
False

Answer 1

The product described is a reverse mortgage, which allows seniors to convert home equity into cash, with repayment deferred until the borrower dies, moves out, or sells the home.

Step-by-step explanation:

The financial product described in the question is known as a reverse mortgage. A reverse mortgage is a type of loan available to homeowners 62 years of age or older that allows them to convert a portion of their home equity into cash. The homeowner can receive these funds as a lump sum, a line of credit, or periodic payments, and the loan is not repaid until the borrower passes away, moves out permanently, or sells the home. Building home equity is crucial, as it represents the value of a homeowner's investment in their property. It becomes especially significant for many middle-class Americans, who may find home equity to be their largest financial asset. Home equity can grow over time as the mortgage is paid down and/or the property value increases.