Millions of older Americans can now remain in their own homes longer as the result of federally insured reverse mortgages.

With a reverse mortgage, instead of a homeowner making payments to a lender, the lender makes payments to the homeowner or mortgagee. The homeowner does not have to repay the loan during his or her lifetime, unless the homeowner moves away or sells the property. Unlike traditional mortgages, the debt, or loan balance, in a reverse mortgage increases over time but can never exceed the net value of the home.

Repayment occurs when the homeowner leaves the home permanently. If the loan ends due to death of the homeowner, the loan must be repaid before the property can be transferred to the homeowner's heirs, repayment may consist of selling the home, by using other funds, or by taking out a new forward mortgage against the home. If the loan is not repaid, the home's ownership transfers to the lender.

A reverse mortgage is a hybrid between a home-equity loan and an annuity, allowing people to convert equity they have built up in their homes into retirement income. Borrowers can select monthly payments, a lump sum cash advance, a credit-line account, or a combination of these options. For all but the most expensive homes, the highest cash advances are available through the federally insured Home Equity Conversion Mortgage (HECM). Other options include lender-insured loans, with terms similar to an HECM loan, and uninsured loans, where advances are made for a fixed term only.

To qualify, you must own your own home, and in most cases, you must be over 62 years old and live in your home at least half the year. Qualifying residences include single-family homes, buildings with two to four residential units, and federally approved condominiums and planned unit developments. A manufactured home on a permanent foundation taxed as real estate may also qualify, so check with your local real estate professional.

The older the borrower and the higher the appraised value of the home, the more money is available. Those 65 years and older can borrow as much as 26 percent of their home's value, whereas someone 85 can borrow as much as 56 percent. Though this program only qualifies on the first $155,250 of the property's value, the private lenders offer larger, non-federally insured loans. The FHA requires that all potential reverse mortgage borrowers attend an informational session at a certified counseling agency as a condition of loan approval.

Is a reverse mortgage right for you? If you have substantial equity in your home; are retired or have lost your primary income; or need living expenses and want to remain in your existing residence, then a reverse mortgage may be a viable option. Be aware, however, that the equity in your home will be reduced over time through negative amortization. Appreciation or depreciation of your home's value will also influence your loan costs. Be sure to carefully weigh the benefits of a reverse mortgage against the merits of other options, such as cashing out your profits by selling the property and moving to a less expensive home.

For information, check with your Mortgage Lender/Broker or visit www.aarp.org/revmort.