Considering a Reverse Mortgage? 4 Things to Consider First.

Key Points Typically, you must be 62 or older and own your home outright or have a low mortgage balance. Because a reverse mortgage must be repaid upon death, it can reduce the amount left to heirs. Keep in mind that closing costs, insurance, and interest rates can affect the overall loan amount. The $23,760 Social Security bonus most retirees completely overlook › A reverse mortgage is a loan that allows homeowners to convert part of the equity in their property into cash. No monthly principal or interest payments are due as long as you live in the home and meet all loan obligations. However, the cost can be prohibitive. Before agreeing to a reverse mortgage, keep these factors in mind. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Versions of reverse mortgages Not all reverse mortgages are the same. In fact, there are several versions, and each operates in its own way. Home equity conversion mortgage (HECM): The version insured by the Federal Housing Administration (FHA) and the most common type of reverse mortgage. Proprietary reverse mortgage: Offered by private lenders without federal insurance. This version is typically intended for homes valued above the insured program's coverage limit. Single-purpose reverse mortgage: Offered by some states, government agencies, and nonprofit organizations for specific purposes, such as paying property taxes or making home repairs. Factors worth considering No matter which type of reverse mortgage you're most interested in, you may want to consider these issues: Your long-term housing plan: If you think there's a chance that you'll be moving within a few years, a reverse mortgage can be extremely costly, particularly due to high upfront fees. Your ability to maintain ongoing obligations: You may find yourself having to withdraw more from your IRA or other retirement account than expected to cover the cost of homeowners' insurance, property taxes, and basic annual maintenance issues. Impact on your heirs and estate: A reverse mortgage will likely mean that your heirs will receive less home equity once the loan and associated costs are settled. Whether or not your current estate plan includes leaving the home to heirs, it's an important point to keep in mind. Effect on means-tested programs: Although reverse mortgage proceeds aren't counted as taxable income, they may be counted as assets for means-tested programs -- such as Medicaid, Supplemental Security Income (SSI), or SNAP benefits -- once deposited in your account. Downside of a reverse mortgage While a reverse mortgage may work out beautifully, this type of loan is not without cons, including: Growing debt: Interest and fees are added to your balance each month, increasing your debt as your home equity shrinks over time. High costs: Between high upfront costs and ongoing expenses, reverse mortgages are an expensive way to borrow money. Risk of foreclosure: After taking out a reverse mortgage, you must continue to pay property taxes and homeowners' insurance, and maintain the home. Failure to do so can trigger default and foreclosure. Alternative options Before making a final decision, an independent financial advisor can help you work through alternative options. For example, if you need extra cash, compare options such as refinancing, a home equity line of credit, trimming existing expenses, using government assistance programs, or downsizing. After years spent planning for everything from healthcare expenses to taxes in retirement , you owe it to yourself to compare all options. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more ... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies. View the "Social Security secrets" » The Motley Fool has a disclosure policy .

Typically, you must be 62 or older and own your home outright or have a low mortgage balance.

Because a reverse mortgage must be repaid upon death, it can reduce the amount left to heirs.

Keep in mind that closing costs, insurance, and interest rates can affect the overall loan amount.

A reverse mortgage is a loan that allows homeowners to convert part of the equity in their property into cash. No monthly principal or interest payments are due as long as you live in the home and meet all loan obligations.

However, the cost can be prohibitive. Before agreeing to a reverse mortgage, keep these factors in mind.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Not all reverse mortgages are the same. In fact, there are several versions, and each operates in its own way.