Paraphrasing a Washington Post article earlier this year, Ballooning credit card debt among American Consumers is stoking demand for a new and potentially risky home mortgage product. This is a loan that allows you to borrow not only what your house is worth, but up to 125 percent of what its worth.

This major financial shift potentially alters the property owner’s degree of fiscal responsibility since it alters the previous traditional 10-20% stake in the property. Additionally, this market is so huge that appraisals are accomplished not formally as previously required, but by drive-by rough gauge of market value.

Driving this recklessness is a projected $7 billion earning from negative equity loans in 1997 alone. According to Moody's Investor Service, the target markets are individuals with good credit but who have run up large debts in the last year or two.

Here is the hook: Though negative equity loans of 13-14% are outrageous, they are better than other debts of 15-21%. Why pay more when you can borrow 125 percent of the value of your home?

If you are contemplating such a step, please be fully aware of other viable options, which show you how to eliminate all debt in the shortest possible time.

A standard approach goes something like this: A reverse mortgage can provide retirement income for those that are "house-rich" but "cash-poor". It allows you to access money, which is not required to be paid back until you leave the house or it's sold. The loan balance, which includes draws against the credit line plus interest charges, grows as a portion of the homeowner's equity. Draws are considered tax-free advances. Plus, reverses are "non- recourse" loans, meaning the amount you owe can never be more than the value of the house.

This sounds good. But some issues though not ignored, are not emphasized and it’s recommended to anyone considering a reverse mortgage to check out the FTC page for Reverse Mortgage .

FTC starts similarly, but.... For example: If you are age 62 or older and are "house-rich, cash-poor," a reverse mortgage may be an option to help increase your income. However, because your home is such a valuable asset, you may want to consult with your family attorney, or financial advisor before applying for an RM.

RMs is rising-debt loans. Pro--- income is without pay back until the house is sold or you die. Con--- interest accrues from the time of the loan. Interest is added to the balance beginning month one and each succeeding month because it is not paid on a current basis. Therefore, the total amount of interest you owe increases significantly with time as the interest compounds.

American Association of Retired Persons (AARP) says, "Even though the minimum age to get a reverse mortgage is 62, the average age is 76. Life expectancy limits the amount you can borrow." A person aged 70 with $100,000 equity in a home would receive $272 per month through an FHA-insured RM (at 10% interest), but a person aged 80 could receive $453.

Origination fees and closing costs. The three plans (FHA-insured, lender-insured, and uninsured) charge fees. Insured plans also charge insurance premiums, and some impose mortgage-servicing charges. Fees may be financed but these costs will be then added to your loan amount with compound interest.

Other Considerations. RMs uses up some or all of the equity in your home, leaving fewer assets for you and your heirs in the future. Interest on RMs is not deductible for income tax purposes until you pay off all or part of your total RM debt. Because you retain title to your home with an RM, you also remain responsible for taxes, repairs, and maintenance.

Your smartest move will be "you are out of debt...and you stay in your own house "