FinanceIntermediateDelaware Exam

What is a 'reverse mortgage' in Delaware real estate?

AA mortgage where the lender makes payments to the borrower, drawing down the home's equity over timeCorrect

BA mortgage where payments reverse direction after 10 years

CA mortgage where the borrower pays interest first, then principal

DA loan made by the seller to the buyer instead of a bank

Why A mortgage where the lender makes payments to the borrower, drawing down the home's equity over time Is Correct

Answer A: A mortgage where the lender makes payments to the borrower, drawing down the home's equity over time

A reverse mortgage (most commonly an FHA Home Equity Conversion Mortgage — HECM) allows homeowners age 62+ to convert home equity into cash, with the lender making payments to the borrower. The loan is repaid when the borrower moves out, sells, or dies.

Exam Tip: Finance

Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.

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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.

Discount Points

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.

Math Concepts

Equity Calculation

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