Which loan type is often used when the borrower is expected to make no payments until they sell or refinance?

A reverse mortgage is designed specifically for older homeowners to access the equity in their homes without making monthly payments. In this type of loan, the lender makes payments to the borrower, allowing them to stay in their home and defer repayment until they sell the home, move out, or pass away. This structure is particularly beneficial for retirees who may be on a fixed income and need an alternative to traditional income sources.

This loan type is fundamentally different from other options. Traditional mortgages require monthly principal and interest payments over the life of the loan. Interest-only mortgages provide an initial period where only the interest is paid, but eventually, the borrower must start repaying the principal. Home equity loans also require monthly payments, with borrowers needing to repay the loan according to agreed terms. In contrast, the reverse mortgage's unique feature is that it delays payments until a specific event occurs, making it the correct choice for the question posed.