Seniors who might consider a reverse mortgage are sorely lacking in knowledge about how the financial instruments work, according to a survey released Wednesday by The American College.

The misconceptions can hinder the effective use of reverse mortgages, the survey says.

The biggest mistake seniors make is thinking it is best to use a reverse mortgage as a last resort for retirement money, the survey shows. In fact, if a reverse mortgage is being considered, it should be used as income early in retirement.

The second-biggest misconception is that heirs have to repay any debt that is above the house value, when in reality they are not responsible for the debt.

In fact, 70 percent of the 1,003 respondents, all of whom were between 55 and 75 years old, failed the test. A passing grade was getting seven out of 10 true or false questions correct. The average score was 4.8 correct answers out of 10, according to The American College.

A reverse mortgage “can be a helpful retirement income tool,” said Jamie Hopkins, co-director of The American College Center for Retirement Income. It “can diversify your home equity, build a non-market correlated source of income to help offset market sequence of returns risk, can be used to improve cash flow by turning off payments to a traditional mortgage and be used for tax efficiency purposes during retirement. Consumers need to better understand the features and uses of reverse mortgages.”

Surprisingly, those with an advisor did just as poorly as those without, The American College says.

The two facts that were best known among respondents are that a lump sum payment is not the only option and that a house does not have to be paid off to get a reverse mortgage.

The survey also explored seniors’ views of where they want to live and 83 percent want to live in their homes as long as possible.

Forty-five percent say leaving the home to their children is not an important consideration in their decision making. Only one quarter feel comfortable with the idea of using their home equity for retirement costs.