A reverse mortgage is a way people 62 or older can live off the equity in their homes without having to sell the house or make mortgage payments.

In a traditional mortgage, the homeowner borrows a lump sum to purchase a house and then repays the lender in monthly payments. In a reverse mortgage, the homeowner receives a lump sump or monthly payments from the lender. These amounts, plus interest, become a lien on the house. The loan does not have to be repaid until the homeowner dies, sells the house or moves out into a nursing home or other dwelling. The homeowner can never owe more than the home is worth and cannot be forced out of the house.

The reverse mortgage payments are not taxable, but interest that accrues on the loan is not deductible until the loan is repaid. Reverse mortgage payments usually do not affect Social Security or Medicare benefits, but if the money is held in a savings account, they cold affect eligibility for Medicaid, Supplemental Security Income or other federal benefits.

Reverse mortgages generally have higher up-front costs than normal mortgages, but their interest rate - which is always adjustable - is comparable to regular adjustable rate mortgages. Some state or local agencies offer lower-cost reverse mortgages. Most private-sector reverse mortgages are insured by the Federal Housing Administration under the Home Equity Conversion Mortgage (HECM) program.

For extensive information, see AARP’s booklet, Home Made Money, at http://assets.aarp.org/www.aarp.org_/articles/revmort/homeMadeMoney.pdf