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Making Your Money Last

More Seniors Tap Their Homes for Income

These loans help homeowners turn their equity into cash.

More older Americans wanting to take advantage of the rise in home prices over the past decade without having to move are considering a reverse mortgage to tap their equity. About 150,000 homeowners will apply for one this year -- twice last year's number, reports the National Reverse Mortgage Lenders Association.

With a reverse mortgage, you receive tax-free cash instead of making payments. Your debt increases rather than decreases, but you do not have to repay it until you move. If you die, your estate settles up. Payout options include a line of credit or fixed monthly payments for life or a specific period. You must be 62 to qualify.

The most common type is the federally insured home-equity conversion mortgage, which is subject to the Federal Housing Administration's loan limits ($362,790 for high-cost urban areas, $200,160 elsewhere), but you will get only a percentage of that. The exact amount depends on your locale, your age, your equity in your home and the interest rate.

For now, high up-front fees make reverse mortgages useful mainly for people who plan to stay in their homes for more than a few years and have few other assets.