What is a reverse mortgage?

A reverse mortgage is specifically designed to allow seniors to access the equity in their homes while still living in them. It provides a way for older homeowners, typically aged 62 and older, to convert part of their home equity into cash, which can be used for various needs such as healthcare, home improvements, or day-to-day living expenses, without the requirement to make monthly mortgage payments. The loan is repaid when the borrower moves out, sells the home, or passes away.

In this context, the other options do not accurately describe what a reverse mortgage is. A loan for purchasing a new home refers to traditional home loans or mortgages used to buy property, not existing equity financing. A governmental subsidy for homebuyers would imply some form of financial aid for purchasing, which is not what a reverse mortgage offers. Lastly, while a reverse mortgage can be classified as a type of loan related to home equity, it is distinct from a standard home equity loan in that it does not require repayment as long as the borrower resides in the home.