Reverse mortgages are getting a lot of attention lately. Here's what you need to know about them.

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Reverse mortgages are getting a lot of attention lately. Here’s what you need to know about them.

With a reverse mortgage , a homeowner receives a lump sum or regular payments based on the equity of his or her home, usually to help fund retirement.

They’re not always a good deal.

The points and fees they charge can be fairly high, and their interest rates can be considerably higher than those for regular mortgages.

The cash flow you can expect from a reverse mortgage is determined by your home’s value, your age and interest rates.

Those 62 years old or older, with little or no debt, stand to benefit the most from reverse mortgages.

Loan programs vary widely in what they offer, so shopping around is critical. Retiring the debt usually means selling the home — often upon the death of the borrower — unless the heirs can cough up the repayment.

The bottom line is that reverse mortgages are generally not the best way to finance a retirement, though for some people they make a lot of sense.

Look into alternatives, such as home-equity loans, or consider selling your home, moving to a less expensive dwelling, and investing and living off the difference.

Note also that getting a reverse mortgage might affect your eligibility for certain benefits such as Medicaid and Supplemental Security Income (SSI).

On the plus side, though, reverse mortgages can offer a line of credit that seniors can draw on whenever the need arises.

While a home-equity loan may cost less to secure than a reverse mortgage, it requires monthly payments.

Reverse mortgages enable seniors to convert some or all of the equity in their home into tax-free income without having to sell it or take on a new monthly mortgage payment.

Learn more at www.hud.gov/buying/rvrsmort.cfm, www.consumersunion.org/finance/revconwc899.htm and www.reversemortgage.org.

Or read “Reverse Mortgages for Dummies” by Sarah Glendon Lyons and John E. Lucas (For Dummies, $17). And don’t sign up for a reverse mortgage without getting advice — from people who don’t sell reverse mortgages.

— The Motley Fool