In which type of mortgage does the borrower receive an up-front sum and repay it over time while living in the property?

In a reverse mortgage, the borrower receives an upfront sum of money that is based on the equity in their home. This type of financing allows seniors, typically aged 62 and older, to convert part of their home equity into cash while still living in the home. Unlike traditional mortgages, where the borrower makes monthly payments to the lender, a reverse mortgage allows the borrower to live in the property without needing to make monthly repayments. Instead, the loan is repaid when the borrower moves out of the home, sells it, or passes away, which typically means that the lender receives the home's value at that time, either through the sale of the property or by other means.

Understanding reverse mortgages is crucial, as they provide financial flexibility for retirees, allowing them to utilize their home equity without the immediate burden of loan repayment. In contrast, other types of mortgages, like conventional or FHA mortgages, require the borrower to make regular monthly payments over the life of the loan, which doesn't align with the scenario described where the borrower is living in the property without making monthly payments. A wraparound mortgage, on the other hand, is a type of secondary financing for purchasing properties and involves the seller continuing to pay an existing primary mortgage.