What type of mortgage allows the lender to pay the borrower based on the home equity?

A reverse mortgage is a type of mortgage that enables homeowners, typically seniors, to convert part of their home equity into cash. This loan is repaid only when the borrower sells the home, moves out, or passes away. The lender pays the borrower based on their home equity, allowing them to receive funds while still living in the property. This is particularly beneficial for retirees who may have limited income but substantial home equity, providing them with financial resources to cover living expenses or healthcare costs without the need for monthly mortgage payments.

In contrast, a blanket mortgage is used for financing multiple properties under one loan, making it primarily for real estate developers or investors. A package mortgage involves financing the purchase of both real and personal property, often used in transactions that include items like furniture or appliances. A budget loan is structured to include all the homeownership costs, such as property taxes and insurance, into monthly payments but does not specifically relate to home equity. Each of these alternatives serves different financial needs and scenarios unrelated to accessing home equity.