Should a REVERSE MORTGAGE be Considered?

To qualify, you must be over the age of 62 and your home must be mortgage-free (or virtually mortgage-free).

A reverse mortgage works like a conventional mortgage in that the house is used to secure the loan. Homeowners would get the cash either in a lump sum or in monthly installments. But unlike a conventional loan, homeowners would pay nothing back until the house is sold.

A tiny percentage of home loans are reverse mortgages. Many lenders have never done one. And there's the problem. It's easy to work with a mortgage lender who claims to have experience in this area but in reality doesn't do many reverse mortgages at all.

When considering a reverse mortgage, it is highly recommended that you work with an experienced lender who can help walk them through the process with a minimum of confusion. HUD has a link on its Web site, www.hud.gov, of reverse mortgage lenders who are approved. You can find more information, plus links to qualified lenders, at Fannie Mae's Web site, www.fanniemae.com. 

There's also great information at www.reverse.org and www.aarp.org.

The best questions to ask revolve around price: how much will the loan cost? How much cash can I get from my house? And, how much equity will be left after five, 10 or 15 years?

A good reverse-mortgage lender will be able to talk to you about how much these loans cost. There is a fairly steep upfront cost (but limited to no more than 2 percent of the loan amount), and if you only keep the loan for a couple of years, the effective annual percentage rate (APR) on the loan will be high.

Inheritance is another big worry. While homeowners may not be concerned with leaving behind an estate, many families do worry that they will have nothing to leave to their heirs. The best part about a reverse mortgage is that the property continues to be owned by you, and you and your heirs will benefit from any price appreciation in the neighborhood.

The paperwork can be complicated, so you may wish to review it with your attorney before signing.