What is a reverse mortgage?

A reverse mortgage is specifically designed to enable seniors, usually aged 62 and older, to access the equity that they have built up in their homes. This type of loan allows them to convert a portion of their home equity into cash, which can be particularly beneficial for retirees looking for additional income to cover living expenses, medical costs, or other financial needs without having to sell their home.

Instead of making monthly payments to a lender, as with traditional mortgages, the borrower receives payments from the lender, which they do not have to repay until they move out of the home, sell it, or pass away. This financial product is aimed at helping senior homeowners equitably utilize their assets while remaining in their homes, thus allowing them more financial flexibility during retirement.

The other choices do not accurately describe a reverse mortgage. A loan for purchasing a new home pertains to traditional mortgage financing, while equity financing for businesses is focused on raising capital for business purposes. Lastly, a short-term loan for emergency expenses does not encompass the unique features and eligibility criteria associated with reverse mortgages.