Which statement describes a feature of a reverse mortgage (HECM)?

Which statement describes a feature of a reverse mortgage (HECM)?

• A. Borrower must be under 62
• B. LTV is based on age
• C. The loan requires monthly payments
• D. It cannot be used to purchase property

Answer: (B)

With a reverse mortgage, the amount you can borrow is tied to your age. The principal limit, which determines the loan size, is calculated based on the age of the youngest borrower, the current interest rate, and the home’s appraised value. Because older ages yield a higher principal limit, the loan-to-value potential increases with age, up to FHA limits. This is why the statement that LTV is based on age is the best description of how a HECM works. The other points don’t fit: borrowers must be at least 62, not under 62; monthly payments are not required— borrowers can choose from lump sum, line of credit, or periodic draws; and a HECM can be used to purchase property (HECM for Purchase), so that claim is false.

With a reverse mortgage, the amount you can borrow is tied to your age. The principal limit, which determines the loan size, is calculated based on the age of the youngest borrower, the current interest rate, and the home’s appraised value. Because older ages yield a higher principal limit, the loan-to-value potential increases with age, up to FHA limits. This is why the statement that LTV is based on age is the best description of how a HECM works.

The other points don’t fit: borrowers must be at least 62, not under 62; monthly payments are not required— borrowers can choose from lump sum, line of credit, or periodic draws; and a HECM can be used to purchase property (HECM for Purchase), so that claim is false.