While the costs of living keep rising, so too do the costs of providing care to elderly parents. Finding the resources to finance home care is a difficult challenge for many seniors. One resource for funds many families haven't thought about is a reverse mortgage.

A reverse mortgage is a potential income source for everyone over the age of 62 who owns a home with substantial cash value. It's called a reverse mortgage because it's designed in reverse: The mortgage bank makes money available to the homeowner, rather than the borrower making payments. After the homeowner dies or moves out of the house, the residence is sold and the loan is paid back to the bank from the proceeds. Any money left over after the loan is paid off goes to the original owner or to the heirs.

If the heirs want to keep the home, they can elect to either pay off the reverse mortgage or take a new mortgage on the house themselves.

There are three ways to receive money from a reverse mortgage:

1. Some reverse mortgage holders like the option to receive a lump sum payment. They can then put this money into an interest-bearing account and use it as needed;

2. Others find that a scheduled cash payment is easier to budget. They can choose to receive the same amount every month to cover their expenses, leaving the remainder of the available cash with the mortgage holder. This method leaves more of the money with the bank and can reduce the interest and principal that will eventually have to be repaid when the house is sold.

3. Borrowers who don't want to have the whole amount as a lump sum, but who would rather keep the whole amount ready for an emergency, may prefer choose to set up a line of credit. The available funds remain with the lending institution, but is easily available to be used in any amount as needed.

These loans are usually more expensive than a conventional mortgage. Origination and other fees, closing costs and interest are often higher than standard mortgages. Because some programs require the borrower to attend financial counseling before closing, these mortgages can take longer to close. However, the "upside" is that the homeowner - the borrower - does not have to have the credit rating or loan qualifications he or she would have to have if taking out a new mortgage.

Because a reverse mortgage is more costly than a conventional mortgage, experts advise that a homeowner should plan on living in the house at least three years, or the costs will outweigh the advantages.

Although taking out a reverse mortgage will eliminate the burden of monthly mortgage payments, it is still necessary to pay taxes and insurance premiums, and to keep up the home. If the homeowner does not keep up with these things the lender can "call" the loan or reduce the amount of money available so these expenses can be paid directly.

A reverse mortgage is often a good way to take operating funds out of a house while still being able to live in it. They can also be complicated, they can be expensive, and they will reduce the amount a borrower can leave to family members. For these reasons it is important to discuss this option with family members and to get advice from your financial advisor before you proceed.