What defines a reverse mortgage?

A reverse mortgage is a financial product designed primarily for older homeowners, which allows them to convert a portion of their home equity into cash without the necessity of monthly repayments. This can provide funds that can be used for various purposes, such as home renovations, healthcare costs, or supplementing retirement income. The unique characteristic of this type of loan is that repayment is deferred until the homeowner either sells the home, moves out permanently, or passes away, at which point the loan must be settled, often through the sale of the home.

Understanding the nature of reverse mortgages clarifies why the option regarding monthly payments is incorrect; in fact, homeowners are not required to make payments while living in the home. The assertion that a reverse mortgage is a short-term loan for buying a new home also misrepresents its true function, as reverse mortgages are primarily geared toward managing existing home equity for older homeowners rather than financing new purchases. Lastly, the notion that it must be settled within 10 years is inaccurate; while various specific terms can apply, there is no universal requirement for a reverse mortgage to be settled within such a timeframe, as repayment is contingent on specific events related to the homeowner's situation rather than a predetermined deadline. Thus, option B accurately captures the essence