Michigan Attorney General Dana Nessel advises homeowners to be cautious about turning to reverse mortgages as a solution to money problems.

Nessel re-issued her reverse mortgages alert Monday to inform residents of the pros and cons related to this kind of loan.

A reverse mortgage is a type of home equity loan extended, in most cases, to those who are 62 years of age or older, the alert states. It can be used to make home repairs, pay for medical expenses, or to supplement retirement income. A lender makes monthly payments to the homeowner based on the equity in the home, using the home as collateral. As long as the person retains ownership of the home and pays the property taxes, the loan does not become due.

“While reverse mortgages can provide financial relief for some, they also come with significant risks and obligations,” Nessel said in the news release. “Financial literacy means recognizing the potential pitfalls and long-term impacts a reverse mortgage can have on your financial future. I urge all homeowners considering this kind of loan to seek professional guidance and carefully weigh their options before signing on the dotted line.”

According to the Consumer Financial Protection Bureau, other requirements to qualify for a reverse mortgage, in addition to being 62 years of age or older, include:

— Home must be the principal residence.

— Home must be owned outright or have a low mortgage balance that can be paid off when closing on the reverse mortgage.

— The person cannot owe any federal debt, such as federal income taxes or federal student loans. The reverse mortgage, however, can be used to pay off these debts.

— Part of the reverse mortgage funds must be set aside for expenses such as taxes, insurance, maintenance and repairs.

— The home must be in good shape. If not, the lender will require repairs before paying the reverse mortgage.

In addition, the homeowner should complete HUD-approved reverse mortgage counseling to discuss eligibility, financial implications and alternatives such as:

— Refinancing — a new traditional mortgage could lower monthly mortgage payments;

— Downsizing — selling the home in favor of a more affordable residence may be the best option for reducing expenses;

— Lowering expenses — many states and localities have programs offering help with property taxes, utilities and repairs.

— Home equity line of credit — this might be a cheaper way to borrow cash against equity, but qualifying for one depends on income and credit. They also carry risks and usually require monthly payments.

— Waiting — You can wait until older to take out a reverse mortgage, when you have less income and higher health care costs.

Several types of reverse mortgages are offered, and it is important to understand which one will be most beneficial, the alert advises.

— Home Equity Conversion Mortgage — This is the most popular type of reverse mortgage. It is insured by the Federal Housing Administration, which guarantees that federally approved lenders meet their obligations.

— Single-Purpose Reverse Mortgage — Often only available to low-to-moderate-income homeowners, the payments from this type of reverse mortgage must be used for the specified purpose indicated by the homeowner, such as home improvements, home repairs or property taxes.

— Proprietary Reverse Mortgages — These are not FHA-insured and not backed by the companies that provide them. They are a bank’s own loan instruments.

For those who decide taking out a reverse mortgage is the right option, the CFPB has a list of scams to be aware of that target older homeowners, such as:

— A family member or caregiver coercing an elderly homeowner into applying for a reverse mortgage, or impersonating the elderly relative during the loan process.

— A bad actor uses an elderly homeowner’s identity, Social Security number or other personally identifiable information without their knowledge to secure the loan.

— A scammer tells reverse mortgage holders they should use the loan money to invest in a “sure thing” or tries to convince them to take out a reverse mortgage to pay for expensive repairs.

— A scammer convinces reverse mortgage borrowers to sign over their power of attorney, giving the scammer sole access to the reverse mortgage loan money.

In the alert, Nessel recommends homeowners protect themselves by not only seeking advice from a financial counselor, but also confirming whether the loan is federally insured, whether the reverse mortgage repayment is limited to the value of the home once the loan becomes due and if the mortgage payments are made directly to the homeowner. Remember that most reverse mortgages come with a right of rescission, which means it can be canceled within three days of closing without penalty.

Reverse mortgages can be a lifeline for older homeowners whose expenses surpass their income, Nessel states. Those who know the potential pitfalls of this type of loan can proceed with caution. Understanding the risks associated with these financial instruments is key to protecting financial futures and home equity.