Last week, we replied to an adult child of a retired couple in their late 60s. He was concerned that his parents -- on fixed incomes -- were having problems making ends meet, owing not only to rising costs of living but also to large homeowner's insurance payments, property taxes, life-insurance premiums and the like.

They had gone more than $40,000 into debt on high-interest credit cards and were able to make only minimum payments. Their home, purchased years ago, has been reassessed by local government to be valued at more than $750,000, thus increasing their property taxes substantially. They were concerned not only about current debt but also about what would happen if one of them became seriously ill.

We pointed out last week the significant increases in the cost of long-term care based upon the "2007 Cost of Care Survey" by Genworth Financial. This week, we offer options on how seniors can handle the onslaught of increased costs without affecting their monthly cash flow.

There was a time when a person's home was his castle, and the equity was sacrosanct. Not today. But it's not only rising costs of eating and driving that are affecting those on fixed incomes. Property taxes are also being increased without mercy by city and county governments, not to mention school districts. The inability of local and county governments to stay within budgets rivals both Congress and state legislatures. And the less money that flows from Washington down to states and from states to cities and counties, the more property taxes will increase.

What to do? High-interest credit cards are certainly not the answer. Nor, for most seniors on fixed incomes, are first mortgages and home equity loans with attendant monthly payments.

But the FHA-insured reverse mortgage, available to homeowners age 62 and over who live at home, allows seniors to transform home equity into monthly income streams and/or credit lines, depending on family needs. The mortgage is repaid when the senior no longer occupies the residence.

While tapping home equity to meet current needs and quality of life may not be the option of choice for many seniors -- because that is not how they were raised -- for folks like our reader's parents, a reverse mortgage may be the best solution.

Prior to receiving these loans, homeowners must receive counseling by Housing and Urban Development-approved counselors who educate not only about eligibility but also about financial implications and alternatives. This prerequisite allows seniors to make informed determinations of whether a reverse mortgage will meet their needs.

The percentage available is determined based on a formula that includes such factors as the age of the youngest owner (if jointly titled), the current interest rate and the value of the residence. The older the owner, the higher the percentage of equity, up to the maximum that is governed by where you live.

Should the residence require repairs, sufficient funds to make those repairs will be taken from the loan amount. There are no credit qualifications, and closing costs can be financed as part of the transaction. The residence may include everything from single-family homes to approved condominiums to manufactured homes on leased land. There are a number of payout options that can be changed for a small fee.

At the time the residence is no longer occupied, the loan principal and interest is paid from the sales price with the remaining equity being paid to the owner's will beneficiaries or legal heirs. If a residence goes down in value, there is no way the mortgage will ever be more than the sale price of the home.

Taking the NextStep: If our reader's parents secured a reverse mortgage, they could establish a line of credit and use it to pay off credit cards and pay annual taxes, automobile and homeowner's coverage and property taxes, not to mention long-term-care insurance, without impacting their fixed-income budget.

For more information about reverse mortgages, go to www.nextsteps.net and click on "useful links."