For Mark Roberts’ Use: Reverse mortgages are sometimes criticized as being a bad deal for seniors. But for some retirees, a reverse mortgage may be a good idea. The main thing to remember is that a reverse mortgage provide financial relief for some people, in the right situation.

So what is a reverse mortgage, and how does it work? Essentially, you borrow against the equity you have in your home, but you never have to pay it back. Instead, your home itself is the “payment” for your loan. As long as you live in the home, you don’t have to repay the loan. But when you die or move out of the home permanently – for example, to a nursing home – then the bank possesses your home and can sell it to repay the reverse mortgage.

For some seniors, a reverse mortgage might be a good deal. Your largest monthly expense may be your mortgage payment. But under a reverse mortgage, you no longer have a payment, and you may even have cash to spend on other living expenses. If you expect to remain in your home for a considerable length of time, have a substantial amount of equity in the home, and need the income provided by a reverse mortgage, it could work out well for you. Reverse mortgages have a low risk of default, and the income is free of taxes.

On the other hand, a reverse mortgage could be a bad idea for someone who dies or vacates the home shortly after taking the loan. And none of us can predict the future! Some retirees also report that the amount of money received is disappointing, and does not cover all of their financial needs. This is an issue to discuss carefully with your financial advisor as you head into retirement, so that you can make a wise decision based on your unique situation.