As you can imagine, you need to have a fair bit of equity in your home to even qualify for a reverse mortgage. The amount of money you can get from the loan depends on that equity, along with the prevailing interest rates and your age. Lenders do their underwriting in part based on how long they think you’ll be in the house. The younger you are, the less money you’ll get because you’re likely to stay a while before paying back the loan. (There is more on how repayment works below.)

The mortgage amount also depends on whether you choose a fixed or variable rate loan and whether you take a lump sum, a line of credit or a periodic payment. That payment can be a set amount for a limited number of years or more like an annuity, the same monthly amount for all remaining years that you (or your spouse who is on the mortgage) stay in the home. Lenders often charge origination fees, and you have to pay mortgage insurance. All of this can cost a lot more than a regular mortgage, though as with standard mortgages, you can roll all the costs into the loan instead of paying them out of your own pocket upfront.

It is possible to qualify for a reverse mortgage if you still have a regular mortgage outstanding on your home, but you have to use the proceeds of the reverse mortgage to pay off any existing home loans. To run the numbers for your own situation, try the reverse mortgage calculator on the National Reverse Mortgage Lenders Association’s Web site.

Because this is a loan, the bank does eventually get its money back, with interest. Every dollar you take out gets subtracted from the available equity that the loan allows you to draw on, and the bank keeps a running tab of the interest on the money you draw down, too. Once you (or your spouse, assuming you’re both on the loan) move out, whether because you’ve downsized, moved permanently to a second residence or nursing home or died, you or your heirs sell the home and the bank uses the proceeds to pay off the loan. You or your heirs keep any money that’s left.

HUD sets the rules for these loans and insures them as well. For years, most borrowers and lenders read HUD’s rules to mean that a borrower or the heirs would never owe more than the loan balance or the value of the property, whichever was less. This is all well and good for couples who are both on the mortgage. Even if one of them dies, the other can stay in the home and keep drawing on any remaining money from the reverse mortgage until he or she no longer lives there.

But in 2008, HUD, worried about falling housing prices, issued what it called a clarification, though AARP argued it was a rule change. The upshot of HUD’s notice is that the home is subject to foreclosure upon the death of the borrower if the estate or heir (say a spouse who was not on the original reverse mortgage) wants to keep the home but is unable to pay off the balance. The heir would have to pay that amount, no matter what the home was worth.