Is a Reverse Mortgage considered a non-recourse loan?

A reverse mortgage is indeed considered a non-recourse loan. This type of loan allows homeowners, typically older adults, to convert part of the equity in their homes into cash. The non-recourse feature means that the borrower will never owe more than the home is worth when the loan is repaid, even if the loan balance exceeds the value of the home. This is particularly beneficial for seniors, as it provides financial security by ensuring they cannot be held personally liable for any deficiency.

In the context of reverse mortgages, this means that upon the sale of the home, or when the borrower passes away or moves out, the repayment amount is limited to the home's value at that time. If the home is sold for less than the outstanding balance of the reverse mortgage, the lender can only recover the value of the home and cannot claim the difference from the borrower's other assets.

Other choices, while they may seem plausible, do not accurately capture the nature of reverse mortgages as non-recourse loans. Some might incorrectly suggest that the status could vary by lender or depend on the type of property involved, but the key defining characteristic of a reverse mortgage across the board is its non-recourse provision.