Which loan is repaid on the sale of the property or upon the death of the borrower?

• A. Reverse mortgage
• B. Sale & leaseback
• C. Open end loan
• D. Straight loan

Answer: (A)

This question tests how repayment triggers differ among mortgage types. A reverse mortgage is designed so the borrower can stay in the home and receive funds against the home’s equity without making monthly payments. The loan balance grows over time and is not repaid until a triggering event occurs—typically when the borrower dies or the property is sold (or the borrower permanently leaves the home). At that point, the loan is repaid from the proceeds of the sale, and any remaining equity goes to the heirs or the borrower’s estate. Because it’s tied to the sale or the borrower's death, it’s common for heirs to consider repayment or selling the home to settle the loan.

The other options don’t fit this repayment trigger. A sale & leaseback involves selling the property and then leasing it back, not a loan that becomes due on death or sale. An open-end loan (like a line of credit) is repaid based on ongoing use and terms, not specifically on death or sale. A straight loan is a typical installment loan with fixed payments and a set term, not a loan that comes due only at death or sale.