Question

Many older, retired households are considered "house poor." Which of the following forms of loans has been designed to help mitigate this problem by offering additional monthly income to these homeowners in exchange for a portion of their housing equity?

A. Purchase-money mortgage (PMM)
B. Package mortgage
C. Home equity loan
D. Reverse mortgage

Answer 1

Reverse mortgage

Step-by-step explanation:

Reverse mortgage is a type of loan in which a borrower from 62 years and above is able take part of their home equity without the need to pay monthly mortgage. This type of loan is majorly for older home owners who do not have sufficient monthly income, this type of loan can be a source of additional monthly income.

In other words, the home owner is able to get cash from borrowing against his/her home equity without selling the home. This type of mortgage loan doesn't have to be repaid until borrower wants to leave the home. Hence, the home can only be foreclosed if the borrower wants to leave the home without paying back the loan.