As the housing market doldrums continue, it’s likely that older homeowners will turn more frequently to a reverse mortgage to help cover some of their expenses.

A reverse mortgage might be just the right thing to do.  Or it might not.  Like any financial transaction it all depends on your individual circumstances.

A word of advice for anyone considering a reverse mortgage:  understand your commitment and the costs involved in a reverse mortgage.  Do the retirement planning math to determine if it is the best way for you to generate the cash you need.

It’s particularly important as the economy and housing market remain sluggish and the marketing hype by less scrupulous lenders picks up.

Reverse mortgages are available to homeowners age 62 and older who have equity in their real estate and want to turn it into cash to cover such things as daily expenses or long-term care or medical bills.

Regulators have grown increasingly concerned about seniors’ lack of understanding of what they are signing up for.  Some of that comes from misleading marketing and advisers.  While counseling is required before taking out a reverse mortgage, we know that many of us don’t fully comprehend the details, especially if we’re under financial stress.

So here are some warnings from the current proposed rules for lenders. 

 * Understand the costs.  Don’t be fooled by marketing that calls reverse mortgages low cost or low risk or a government benefit.  It is a financial transaction with some fairly substantial upfront costs.  There may be some other ways to tap the equity in your home that would make more sense for your financial situation. Also, the income you receive may impact your ability to receive assistance from government programs. Look at the whole picture – today and in the future. 

 * Understand your ongoing obligations. This is a mortgage that requires repayment – it’s just usually happens from proceeds of the loan. You are still responsible for maintenance of the home, property taxes and hazard insurance.  If there is no escrow attached to the reverse mortgage the homeowners need to pay those fees on their own.

 * Watch Out for Cross-selling of Products.  Walk away from agents who try to push you into taking proceeds and then investing the money in annuities or other investments, or any type of additional services.  How the proceeds are paid out is an important financial decision for you.  Make sure it’s not influenced by the commission your agent would be receiving for selling you additional products.

A reverse mortgage can be a great resource for helping you stay in your home and there are reputable companies that can help you determine if it is right for you.  But make sure you fully understand the costs and obligations that come with it. And don’t get caught by a scammer, masquerading as a reverse mortgage lender but really just trying to get your data or sell you an investment.

Here are 10 tips from the government about reverse mortgages.

A Washington Post article about potential pitfalls of reverse mortgages.

Article on reverse mortgage mailing that’s sounds like an official government program – but it’s not.  Don’t get caught.