Would a reverse mortgage work for you? Like any other financial dilemma, something as serious as deciding to cash in on house equity and putting a bank in the position to own your home requires the weighing in of many sides.

In a reverse mortgage, if you own a home and are 62 or older, you can borrow money against your home value in a lump sum or payments. If you decide to sell – or if the owner dies – just like a typical loan, the money must be paid back with interest.

An excellent resource to dissect the facts is Francine Huff, who writes about real estate issues for BestReverseMortgage.com. In this guest post on reverse mortgage at Get Rich Slowly, Huff explains one of the main benefits: Tapping into needed cash in order to pay bills that a fixed or retirement income cannot cover.

Huff also points out the snares and small print in reverse mortgage. For example, although the money obtained isn’t considered taxable income, your eligibility for Medicaid payments could be affected. Another factor to watch are the upfront fees. This AARP article discusses the downfalls even closer. That’s why a home equity loan or a low-interest personal loan with a reputable credit union might be a better alternative.

Or even a deal with a family member. At Gina’s Tax Tips, accountant-minded Gina Gwozdt recommends skipping fees and the bank altogether by creating a family agreement or a family reverse mortgage, structured with similar terms you’d find in a formal contract between a bank and a home owner. The adult child would be the lender, for example, setting up the contract so stake in the house says in the family, not in a bank.

Above all, find the source or reason for needing a reverse mortgage and remember it is money that needs to be paid back or the home will become possessed by the bank or lender.

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