Finance
Which of the following best describes a 'reverse mortgage' (HECM) available in Colorado?
AA mortgage that pays off itself through property appreciation
BA loan for homeowners 62 and older that converts home equity to cash with no monthly payment required✓ Correct
CA mortgage with payments that increase over time
DA mortgage for investment properties only
Explanation
A HECM (reverse mortgage) allows homeowners 62 and older to convert their home equity into cash. No monthly mortgage payments are required, but the loan becomes due when the homeowner sells, moves, or dies.
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Key Terms to Know
Amortization
The gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Math Concepts
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