The Thompsons, a retired couple, need more income. Their lender offers a type of loan in which the lender will send the couple a monthly check for as long as the couple lives on the property, in exchange for a lien against the equity in their property. The lender is referring to a/an:

• A. Reverse mortgage
• B. Home equity loan
• C. Adjustable-rate mortgage
• D. Second mortgage

Answer: (A)

This is a reverse mortgage. It’s a loan designed for homeowners who want to access their home equity while staying in the property. The lender provides payments to the borrower—monthly, in this case—for as long as they continue to live there. The loan is secured by a lien on the home, and interest accrues over time, meaning the loan balance grows. repayment is typically due when the borrower dies, sells the home, or permanently leaves the property. Heirs are protected by the loan being non-recourse, so repayment generally can’t exceed the home's value. This setup is distinct from a regular home equity loan, which requires regular payments, or from an adjustable-rate or second mortgage, which are types of standard loans rather than ongoing payments to the borrower.