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Beat the Housing Crisis

Lost equity in your home? Underwater? Here's how to navigate the housing market

Homeowners who are 62 or older have one other option: a reverse mortgage. With a reverse mortgage, you can tap into your equity to pay off your home loan and thus be free of monthly mortgage payments. (You'll still need to pay property taxes and insurance, though.) If there's any equity left over, the lender might make monthly payments to you, offer you a lump sum, or set up a line of credit for you. You will be allowed to stay in the home until you die or move out, at which point the loan becomes due. If there's any equity left at that point, it will go to you or your heirs.

The good news is, there are no income or employment requirements. The closing costs and fees can be expensive, but they can be rolled into the mortgage. About 80,000 homeowners are expected to take out reverse mortgages this year.

"The beauty of the reverse is that you're able to stay in the home," says Tom Kelly, author of The New Reverse Mortgage Formula. For many boomers who've taken on too much debt, "they're just going to want to have what's left of their mortgage go away."

But to get a reverse mortgage, you must have equity, which is your home's appraised value minus any loans. The amount you can borrow depends on your age, as well as on the amount of equity you have in your home: If you're 62, you could qualify for a lump-sum payout of about $55,000 on a house in which you have $100,000 in equity, according to AARP's Reverse Mortgage Calculator. At 72, you're eligible for about $61,000 on that same house, and at 82, you could get up to $67,000. "It's probably not something that should be used early in retirement," says John H. LeBlanc, a certified financial planner with Modera Wealth Management in Boston. Instead, he advises clients, reverse mortgages are best for older retirees with more equity in their homes.

Next: What to do if you're facing foreclosure. >>

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