Sometimes the best-laid plans just don't pan out. You spend almost a lifetime struggling to put away as much money as you can for retirement or savings but then life throws you some curve balls. Perhaps you find yourself short of cash for your child's semester tuition payment, or your daughter's wedding requires funds you just don't have or medical expenses put you in debt or a you lost your job or credit card debt has gotten out of control or so on and so on.

        Like many people, you may find yourself dipping into your savings or your retirement funds in order to pay off these obligations and by the time you are ready to retire all you have to show for your life's efforts is the equity you have in your home. The problem is you still need to live in your home and the idea of moving to a far away, affordable place does not work for you. Where can you turn if you're retired and strapped for cash? After exhausting all other possibilities, you may respond to an intriguing pitch for a "reverse mortgage."

        Reverse mortgages allow older homeowners to convert part of the equity in their homes into cash without having to sell your home or take on additional monthly debt payments. You can then use the money to reduce other debts, help finance a grandchild's education, pay for unforeseen expenses, or simply to survive. In a regular mortgage, you make monthly payments to the lender. In a reverse mortgage, you receive money from the lender and generally do not have to pay it back for as long as you live in your home.

        Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. To qualify for a reverse mortgage, you must be at least age 62. If the home is owned jointly, both you and your spouse must meet the age-62 requirement. Unlike a traditional mortgage, you don't have to demonstrate earning capacity. Best of all, the IRS treats payments received from a reverse mortgage as a tax-free return on your investment.

Types of Reverse Mortgages:

Single-Purpose Reverse Mortgages
These types of reverse mortgages generally have very low costs but are not available everywhere and can only be used for one purpose, such as home repairs, improvements or to pay property taxes. In order to qualify for these loans your income must be low or moderate.

Home Equity Conversion Mortgages ("HECM")
These types of reverse mortgages have high up-front costs in the form of origination fees, closing costs, and servicing fees, but are widely available, have no income or medical requirements and can be used for any purpose at all. They are federally insured and require that you meet with a government approved counselor, who will explain the financial implications of taking out a reverse mortgage. You have loan options, such as receiving payments of a fixed monthly amount, a line of credit or a combination of both. Most reverse mortgages are of the HECM variety and are available in all fifty states, the District of Columbia and Puerto Rico.

Proprietary Reverse Mortgages
Like HECM's, these reverse mortgages come with hefty up-front costs, are widely available, have no income requirements and can be used for any purpose.  They are, however, not federally insured, but backed by the private institution that underwrites the mortgage. The costs of these private loans are generally greater than all other reverse mortgage-types. Whereas all HECM reverse mortgages must follow HUD rules, Proprietary Reverse mortgages do not.

        There are a number of factors that affect how much you can borrow, such as your age, the appraised value of your home, current interest rates and where you live. In general, the older you are, the more valuable you home, and the more equity you have in your home. This translates into more money you will be able to borrow in a reverse mortgage.