It can be a genuine option for retirees who are house-rich but cash-poor — someone with a valuable, fully-owned home but limited monthly pension or savings income. It allows them to stay in their home while unlocking some of its value for living expenses, medical costs, or general financial cushioning, without having to sell and relocate.
The trade-offs are significant enough that it's not a decision to take lightly. The eventual loan amount, including accumulated interest, reduces what's left for your heirs, since the property is typically sold to settle the loan after your lifetime. The payout amounts are also generally more conservative than what an outright property sale and reinvestment might generate, and terms vary considerably between lenders.
It's generally considered a option of last resort among retirement income options — worth exploring if other income sources genuinely fall short, but usually after other resources (savings, other investments, family support) have been considered first.