Question 13

Reverse mortgage allows homeowners to utilize the equity built up in their home without having to sell.

A reverse mortgage is a financial product specifically designed for homeowners, typically seniors, to convert a portion of their home equity into cash, providing them with funds while allowing them to continue living in their home.

A) accelerated mortgage

An accelerated mortgage is a type of loan repayment plan that allows borrowers to pay off their mortgage faster, usually through higher monthly payments or bi-weekly payments. This option does not provide access to home equity without selling the property, making it incorrect for this context.

B) graduated payment

A graduated payment mortgage is structured to start with lower payments that gradually increase over time. While this loan type can be beneficial for some borrowers, it does not facilitate the utilization of home equity without selling the home, thus making it an unsuitable option.

C) sale-and-leaseback

A sale-and-leaseback arrangement involves selling a property and then leasing it back from the new owner. While this allows former homeowners to access cash from the sale, it requires them to relinquish ownership of the home, which is contrary to the concept of utilizing equity without selling.

D) reverse mortgage

A reverse mortgage allows homeowners, particularly seniors, to tap into their home equity while still residing in the property. This type of loan provides a source of income without necessitating a sale, making it the correct choice for those looking to access their home equity.

Conclusion

The reverse mortgage is the only option that enables homeowners to access the equity in their home without selling it, allowing them to maintain ownership and occupancy. All other options fail to meet the criteria of providing liquidity from home equity without a sale, highlighting the unique nature of reverse mortgages in this context.