I have to admit that Fred Thompson never appealed to me a lot, either as an actor or a politician. I always had the impression that what he was saying was not necessarily connected to what he was really feeling. Maybe that was just me, though.

Still, when I started seeing his pitch for “reverse mortgages” on television commercials recently, I wondered whether his endorsement was going to make people more comfortable, or more suspicious.

I don’t actually know anything about the specific company he was representing, but I do know this: reverse mortgages can be a legitimate and very useful tool for financing retirement, especially in the late stages. At the same time, they're not for everybody, and even if you decide that one makes sense for you, you need to be careful whom you work with.

First of all: what is a reverse mortgage? The name is a little scary, and little misleading. Scary, because it sounds like one of those tricky, dangerous financial instruments that helped get us into a recession, like “credit default swaps.” Misleading, because it also sounds as if, in a reverse mortgage, you lend money to the bank, which is not at all what the “reverse” aspect means!

What a “reverse” mortgage really means is that instead of the bank giving you money so you can acquire a house, it gives you money to give up your house – when you are done living in it.

Suppose you (or maybe a parent of yours, or some other elder friend or relative) is retired and lives in a house that has a fair amount of home equity. Let’s also suppose that this person (let’s imagine it’s you) is running out of other resources to live on, and Social Security alone isn’t really going to pay the bills. You need cash, and you may need it for an extended period of time. But your net worth, at this point, is pretty much all tied up in your house.

How do you get it out? Maybe you can sell the house, but perhaps, like now, the market is poor for sellers, or perhaps you really don’t want to move out of your house. Maybe you can get a new mortgage or home equity line of credit, but since you don’t have an adequate source of income, this can be a little tricky, depending on the policies of the bank. Here’s where a reverse mortgage can come into play:

A lender (usually some sort of bank) will offer you a “reverse mortgage,” whereby they will provide you with the cash you need, and you still get to live in your house. But when you die, or otherwise are ready to move out, the lender has first call on the value of your house. It’s actually less of a “reverse” mortgage than it is a special flavor of a traditional mortgage. The bank provides money for you, as it does in a traditional mortgage, and when it’s time to sell the house, the mortgage gets paid off from the proceeds of the sale before you or anyone else in the family gets any.  Just like any other mortgage.

It’s a “reverse” mortgage only in financial terms. Instead of starting with a large loan balance and gradually paying it off, as you do in a regular mortgage, you usually build up your balance slowly (as the bank provides you with money for your living expenses), and then someday the balance gets paid off all at once.

Is this legit? The short answer is: Yes. But as with any financial product, there are costs and risks. So you have to decide whether it’s right for you.

In general, a reverse mortgage can make sense if you are at least 62 years old (both of you, if you’re married), you need cash, you have significant equity in your home, you expect to continue living there for at least a few years, no one else in your family is counting on owning the home when you’re done with it, your house does not need extensive repairs, you don’t have a better way of getting cash, and you don’t already have a mortgage that has very favorable terms that you would have to give up.

The analysis and thought process that goes into this, therefore, is a bit tricky. In fact, if you get a reverse mortgage called a “Home Equity Conversion Mortgage” – a government-backed reverse mortgage, which is normally the way to go – there is a mandatory counseling process to assure that you really understand what you’re getting into. The government is trying to assure that elderly people are not being taken advantage of.

That can happen, because despite a certain amount of regulation, the government does not mandate exactly what kind of deal you can be offered. Lenders set their own interest rates, fees, and other terms of the loan, just as they do with other kinds of mortgages. Some of these terms will depend on the situation: calculations will be based on your age, the amount of equity in your home, and what current interest rates are. But some of them depend on what the lenders think they can get by with.

If the proposed fees amount to more than about 2% of the potential future loan amount, then you are probably being ripped off. But that doesn’t mean low fees are always better. Some lenders may offer you a reverse mortgage with no fees at all, but the interest rate is likely to be higher.

There are other choices (and caveats) as well. You typically have a choice among getting a lump sum payment, a level monthly payment, or a line of credit you can write checks against. Lump sums and lines of credit can be dangerous for people who have a history of problems with overspending and credit. If you do take out a reverse mortgage, you still own the home and you are still responsible for insurance, taxes, and maintenance. If your house needs repair, the lenders may insist that those repairs be done up front, with the cost immediately going onto your loan balance.

In addition, although you will not be forced out of your home, if you use up your home equity and can no longer get more cash from your reverse mortgage, you might have to move anyway just because you can’t afford to live there any longer, and the lender is likely to get all the proceeds from the sale of the house. If you have children who would want to keep the house in the family, they can pay off the mortgage themselves if they can afford to, but they won’t simply inherit the house. And one other big caveat: when the house is sold, there might be capital gains taxes due to be paid, and that money will also have to come from somewhere.

So a reverse mortgage has lots of implications, including some others beyond what I have mentioned here. So it’s a big decision. Don’t make it because Fred Thompson says he loves the company, or because a nice person called on the phone. And don’t let your parents or other loved ones leap into this choice because it looks like the easy way out of a tough spot.

It might just well be the perfect answer for you or someone else. But you have to work through the implications before you can know that. And you can also shop around for the best deal, as you can with any other purchase.

Addendum: Just uncovered news of a recent announcement from the Mass. Commissioner of Banks: five internet-based reverse mortgage sellers are not approved as reverse mortgage brokers or lenders in this state, and they are offering incomplete and misleading information: Eldervantage LLC, Lender 411 LLC, Senior Reverse Mortgage Online, Reverse Mortgage Helpdesk, and Reversemortgesite.

Chuck Yanikoski is a retirement adviser who lives and works in Harvard. For more about him, or to contact him directly, visit http://www.ChuckYRetirement.com.