So on a $200,000 home, the most you can expect is $160,000. An end result is that people's spending habits need to change as a result of the limits on home equity loans.

But in some cases, tapping into a home's value may be the only option to get cash. Since living expenses continue to rise, and more seniors are on fixed incomes with no assets other than their homes will need to establish cash flow.

A reverse mortgage allows a homeowner to receive nontaxable payments based on the value of a home with a mortgage that has been paid. It is sometimes described as a house paying the homeowner back.

The U.S. Housing and Economic Recovery Act of 2008 makes reverse mortgages more attractive by:
* Raising the amount of equity homeowners can borrow against.
* Capping origination fees.
* Protecting seniors against inappropriate practices by lenders.

Reverse mortgages should remain a last resort for seniors because it is an expensive proposition.

The new housing law allows a maximum of $6,000 for an origination fee. The fee is based on the law's new scale of 2% for the first $200,000 of home value, and 1% per $100,000 of remaining home value. Previously, homeowners were charged 2% of the home's value.

A reverse mortgage could use up the entire value of a home, and the homeowner is responsible for property taxes and home maintenance, which is why you must consider all options before using a reverse mortgage.