I fully realize if it sounds too good to be true, it probably is and There Ain’t No Such Thing As A Free Lunch (TANSTAAFL) immediately jumped into your head when you read the title of this article. However, if you are 62 or over, you may have just found the goose that laid the golden egg.

A reverse mortgage is exactly what the name implies. Rather than you paying a monthly sum of money to a mortgage company, a mortgage company pays you. There are three types of reverse mortgages and all have the same eligibility requirements.

You must be at least 62, live in, and own, your home and sign a contract. You must also have equity in your home and the inherent interest rate is based on what the lender is currently charging (more about this later) on non-reverse mortgages. The lender, by the way, will also have your property appraised for which you may or may not be charged.

There are no income restrictions such as those imposed by Social Security and most are tax free since they do not involve additional features such as an attached annuity. They also do not affect your social security benefits nor your Medicare entitlements.

This article discusses only those mortgages without additional features. Should you wish to know more about reverse mortgages with additional features, consult with a competent tax professional to reduce the chances of running afoul of tax laws.

The FTC’s website, http://www.ftc.gov/bcp/online/pubs/homes/rms.htm has an excellent article on reverse mortgages but it also does not discuss mortgages with additional features. Another reason to consult with a tax professional.

This tool called reverse mortgage is actually a loan, hence an interest rate, which allows senior citizens, or as some say, the elderly, to convert part of their equity into cash without having to sell their home. Because it is a loan “in reverse” you are receiving a monthly sum and not paying a monthly amount while you live in your home.

However, this loan must be repaid and repaid with interest should you sell, die, no longer live their as your principal residence or reach the end of the pre-selected loan period. You remain responsible to pay real estate taxes, insurance and all attendant maintenance expenses which, of course, you would have to pay with, or without, a reverse mortgage.

With this explanation, the picture becomes more focused, right? You enjoy a monthly sum, tax free and non-repayable until a date sometime in the future, while remaining in your home. As close to a win-win situation as one can get in this day and age.

It doesn’t take a rocket scientist to realize anyone who is cash poor but house rich should at least investigate this tool. However, like any other instrument involving your signature on the dotted line involving financial obligation, you must have some preliminary information.

I mentioned there are three types of reverse mortgages. The first is the single purpose reverse mortgage. These are offered by some sate and local government agencies and nonprofit organizations.

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