03/20/2012 01:09 pm ET

Reverse Mortgages: Boomers Increasingly Rely On Risky Loans

Here's another grim sign for boomers looking ahead to retirement.

More of them are tapping into their home's equity to take out so-called reverse mortgages, according to a new report by MetLife, the nation's largest issuer of these types of loans. Of homeowners who are considering a reverse mortgage, one in five are "leading edge baby boomers" between the ages of 62 and 64, as compared to almost one in 20 in 1999, according to the report.

“It spells trouble,” said Stephanie Moulton, a professor at Ohio State University and a former reverse mortgage counselor for AARP, in an interview with

A reverse mortgage allows a homeowner to stay put while tapping into the equity she's already built up in the property. Once you've signed the paperwork--and paid some hefty fees--the bank then will send you a monthly check or a lump sum that is paid off once you sell the home or die.

Reverse mortgages are available to homeowners who are at least 62 years old. For retirees looking to supplement an existing nest egg, they can make a lot of sense. But these days more and more homeowners are just using the monthly cash flow to make ends meet.

"In the past, the typical borrower was an elderly widow who took out this loan to supplement her meager income," begins the report. "But now ... those in their late 50s and 60s, many who have been especially hard hit by the ongoing recession, may be starting to think about reverse mortgages as a solution. They are struggling financially to pay for
everyday expenses, as well as assist their children and elderly parents."

The report goes on to explain that if these boomers draw down their home equity in their early 60s, they risk losing a future financial safety net that they could very well need, given that average life expectancy in America is rising, passing 78 years last spring, according to the Centers for Disease Control and Prevention.

Like so many financial products, a reverse mortgage can be helpful or harmful depending on how you use it. To navigate the process, check out AARP's materials on the subject, which provide both basics to help you understand how the loan works as well as 10 things you should know before signing the dotted line, including information on various restrictions and fees.

The Federal Trade Commission and the Department of Housing and Urban Development both offer helpful tips on how to avoid reverse mortgage scams that push homeowners into unnecessarily expensive loans.