He says he’s solving them both by taking out a reverse mortgage.

The unusual loan structure allows people 62 and older to convert equity in their house to tax-free income without having to sell the home, give up title or take on a new monthly mortgage payment. When the borrower leaves the house, the property reverts back to the lender to pay off the loan.

Although reverse mortgages have been in the Texas market for 10 years, they are still little used. A few more than 7,000 were taken out last year, said Scott Norman, president of the Texas Association of Reverse Mortgage Lenders.

But that number is increasing, as older baby boomers and other seniors discover this way to free up their home equity to serve present or future cash needs.

For Thomas, a salesman in the check-printing industry for 34 years, a reverse mortgage means financial security.

"The last thing I wanted to do was lose my home," he said. "And I didn’t want to depend on using all my savings or depleting my separation payment to pay my mortgage."

Instead, Thomas talked to a housing counselor and started the paperwork for a reverse mortgage, which he plans to sign on his 62nd birthday in August.

Thomas will still live in his house. He’ll continue to pay property taxes and homeowners insurance.

But his lender will give Thomas the equity he has built up in his house to pay off the remainder of his mortgage. That’s the first requirement of reverse mortgages: The existing mortgage is retired so the new lender has a first lien on the property.

With payments for principal and interest eliminated, Thomas’ monthly mortgage payment will drop from $1,326 to around $450 — just the amount needed for escrow to pay taxes and insurance when those come due.

"My payments will be so much lower," he said.

Thomas said he will also be protected if he has a health problem that causes him to incur a high medical debt. With the lender holding a first lien on the property, the hospital or doctors would have little to recover from a second lien.

High medical debt could easily become a reality for Thomas, despite his good health. That’s because he lost his health insurance in the layoff.

He plans to continue his health coverage under COBRA for the next 18 months, which is the limit. But after that, he says, he will likely have no health insurance for almost two years until he is eligible for Medicare at age 65.

Increasingly, Texans are turning to reverse mortgages, said Judith O. Smith, owner of a Fort Worth mortgage company that bears her name. She said she has closed on more than 80 of the loans since the first of the year.

Over the last 24 months, Texas homeowners have borrowed more than $1.1 billion through reverse mortgages from about 200 lenders, Norman said.

Reverse mortgages in Texas can be taken out in several ways — a lump sum, a monthly payment, a combination of the two or a line of credit — depending on your need, Smith said.

Although the poor economy has driven most of the volume, changes made under the stimulus package passed in January have contributed. That measure increased the cap on reverse mortgages from $417,000 to $625,500, Smith said. The increase is in place only until the end of the year, however, and then Congress will have to decide again what the cap will be.

"We’ve seen an increase in reverse-mortgage borrowers paying off a lot of expensive mortgages and lowering their payments from $4,100 a month to $399 a month," she said.

The stimulus package also reduced the origination fee, to 2 percent on the initial $200,000 of the home’s value and 1 percent on the rest, up to a cap of $6,000.

Even with this reduction, the loans have significant costs, said Cara Smith, a Housing and Urban Development Department-approved reverse-mortgage counselor with Housing Opportunities of Fort Worth. Taking out a reverse mortgage entails all the closing costs — origination fee, title, appraisal and the like — of a regular mortgage, plus specific fees, such as a monthly service charge.

"The fees are very high," she said. "But most seniors are OK with it."

Here’s an example: A home with an estimated value of $80,000 will have around $6,500 in HUD-dictated closing costs. Included is required HUD mortgage insurance, the origination fee and other financing costs, and a monthly service charge of about $30 a month, which over the years could easily add up to $4,500 or more, Smith said.

However, as with traditional mortgages, many fees can be financed, reducing out-of-pocket expenses.

The amount borrowers can get from a reverse mortgage is based on their age.

On an $80,000 house owned outright by a 68-year-old, the payoff could be $28,000 to $36,000 in cash, depending on whether it is a fixed- or variable-rate loan, Smith said.

Again, after that, there are no more mortgage payments except for escrow. And that’s for life.

Norman says that the loans are not for everyone and that to make it work, seniors should have at least 50 percent equity in their homes.

Some borrowers who go to Smith for counseling are using a reverse mortgage to avoid foreclosure or to gain cash to pay for such regular expenses as groceries and medicine, she said.

"I’ve seen it be a miracle for some people," she said. "People literally have used it to put food on the table."

For more information on reverse mortgages:

AARP addresses reverse mortgages on its Web site, www.aarp.org (search for "reverse mortgage"). AARP will also send you information if you call 800-209-8085, and it provides free reverse-mortgage counseling by telephone.

The National Reverse Mortgage Lenders Association distributes a free information booklet called "Just the FAQs: Answers to Common Questions About Reverse Mortgages." Order it by phone at 866-264-4466, or go to www.reversemortgage.org.