ArcaMax

For seniors who own their own home — fully paid off or with a small remaining mortgage — but need more income, a reverse mortgage can be the perfect solution. Or it can be a costly mistake. And you won’t know until you consider all the costs as well as your likely future housing needs.

Here are some key details on how reverse mortgages work:

—You can withdraw either a lump sum, use a line of credit, or receive monthly payments — tax free — out of the equity you have built up on your home.

—Most importantly, you can never run out of money or home equity, or be forced out of your home because of those withdrawals.

—When you sell your home or die, the amount you have withdrawn plus interest and fees, is taken out of the proceeds, with the balance going back to you or your heirs. If no equity is left, neither you nor your heirs owe any money.

—The standard home-equity conversion mortgage (HECM) is available to homeowners age 62 or older who have either paid off their mortgage or have a small remaining balance. The reverse mortgage is first used to pay off the mortgage balance.

—The amount you can receive is determined by your age, the value of your home and current interest rates. The older you are, the more money you get!

—You don’t need a credit check to qualify, and you retain title to your home.

—You remain responsible for property taxes, insurance and general upkeep of the home. So the lender will want to see evidence that you have enough ongoing income to do that.

—You must have independent counseling from an independent HUD-certified housing counselor before a reverse mortgage will be granted.

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