Which of the following statements is accurate regarding Reverse Mortgages?

The statement that accurately captures the essence of reverse mortgages is that they allow a consumer to convert equity in their home into cash. This is the primary function of a reverse mortgage, which enables homeowners, typically older adults, to access the equity built up in their home without the requirement of monthly mortgage payments. Instead, the loan is repaid when the homeowner sells the house, moves out, or passes away, after which the proceeds from the sale are used to repay the mortgage.

While the other statements may contain elements of truth, they do not fully represent the unique characteristics of reverse mortgages. For instance, while they may share some features with annuities, reverse mortgages specifically are loan products rather than annuities that provide regular income. Furthermore, reverse mortgages are indeed a non-recourse transaction, meaning the borrower or their estate will never owe more than the home’s value at the time of repayment, but they are not typically repaid through monthly payments over time like traditional mortgages.

By understanding these core aspects, you appreciate why the primary focus of reverse mortgages is to allow homeowners to utilize their home equity in a manner that supports their financial needs in retirement.