Whether you or a loved one is facing the need for long-term care, the planning and choices of care services can make for some tough decisions. Since about 60% of people aged 65 and older will need some type of long-term care in their lifetimes, planning and being prepared are essential.

The US Department of Health and Human Services has announced a new website as a clearinghouse for information about long-term care. The site covers the definitions and costs of long-term care as well as tips on planning and the options available to pay for long-term care.

Visit the National Clearinghouse for Long-Term Care Information site and sign up to receive an “Own Your Future” planning kit. The kit is free and can be ordered or downloaded by following this link.

Reverse mortgages are of three different types but it is likely that only one will be appropriate to your circumstances:

1. Government agencies and nonprofit organizarions offer a reverse mortgage for specific needs, such as home repairs and improvements or property taxes. Although this type will have lower costs, it can only be used for the purposes specified and is intended mainly for low income applicants.

2. The Home Equity Conversion Mortgage (HECM) which is insured through HUD, the department of Housing and Urban development. You must be advised by a government-approved housing counseling agency before applying for this type of loan.

3. Private loans through other lenders who offer proprietary reverse mortgages.

Remember, you must be at least 62 years of age and live in your own home to qualify for most reverse mortgages. Proceeds are tax-free but the interest is not deductible from your income tax until the loan is paid off.

The most important step to take before considering a reverse mortgage is to consult a financial counselor.

In a reverse mortgage, the loan is against the equity of your house and so income has no effect upon the terms. With each loan advance taken, the equity will decrease, although there is usually a nonrecourse clause to ensure that no more than the value of the home can be taken as repayment of the loan. This affords some protection to the borrower, at least.

All debts on the property must be paid off before you apply for a reverse mortgage. And, once the loan is granted, it will not become due while you live in the house, unless you sell the property or move away.

Ownership of the home remains yours and so you will still be responsible for payment of taxes, maintenance and insurance that may accrue. Any default on these obligations can cause the loan to become due and payable. Certain other circumstances can cause the loan to become payable immediately. These can include renting out all or part of your home, taking out another loan on the home, declaring bankruptcy or the house being condemned as unsafe.

Lenders do usually charge fees for origination of the loan and closing costs. There may also be servicing fees. Interest rates on the loan may be fixed or variable. It is important to understand all the fees associated with your loan.

Next: The three types of reverse mortgages

With a traditional forward mortgage, over time your debt decreases and your home equity increases. You borrow money to purchase a home and make monthly payments.

A reverse mortgage is a loan against your home that you don’t have to pay back for as long as you live there. You can turn the value of your home into cash without having to make monthly payments. This money can be taken as a lump sum, monthly cash payments to you or in a creditline account where you decide how much cash is available to you.

To qualify for a reverse mortgage, you must be 62 or older and own your home. With a reverse mortgage you don’t have to pay anything back until you die, permanently move out of your home or sell it. Unlike forward mortgages, where your income must be sufficient to qualify, you need not have any income to qualify for a reverse mortgage because there are no required monthly payments.

As you take loan payments you will be “spending down” the equity in your house. When the loan is over, your heirs must repay the loan plus the interest. During the term of the loan you are still responsible to pay the taxes and insurance on your home.

Before making any decisions regarding a reverse mortgage, there are several factors to consider. We will cover these in future posts.