A new federal housing law has raised the ceiling on the amount of money seniors can obtain from a reverse mortgage and lowered the fees charged for the loan.

Previously, with federally backed loans, the amount a homeowner could borrow had to stay below the dollar limit the county set. But the new law, which takes effect on January 1, 2009, sets a national limit at $417,000 and up to $625,500 in high-cost areas. The previous range was $200,160 to $362,790.

That means that if you have up to that much equity in your home, you could tap it for a reverse mortgage.

At the same time, the national regulations will put a cap on the origination fee that lenders can charge for federally backed loans. The new rules let lenders charge up to 2 percent of the loan amount for the first $200,000 of the home value and 1 percent on the balance of the value. And the origination fee is capped at $6,000.

Another rule change is meant to help retirees who want to get into a property that "better suits" their needs, says Darryl Hicks, vice president of communications for the National Reverse Mortgage Lenders Association. It combines two transactions into one step and allows the borrower to take out a reverse mortgage on the new home. "The intention of the program is to create a greater sense of flexibility," Hicks says.

It pays to analyze a reverse mortgage the same way you would any financial move that involves the roof over your head: carefully.

Withdrawing your equity

When it comes to the loan, you can take it in a variety of ways, depending on which works better for you: • A lump sum. • A set amount each month for a certain number of years. • A set amount each month for as long as you live in the home. • A line of credit -- about 80 percent of current loans. • A set amount plus a line of credit.

A relatively new addition to the financial world (they've been around 19 years), reverse mortgages were designed to let seniors tap home equity without having to worry about repaying it. Instead, the bill is settled when the house is eventually sold. If there isn't enough profit to pay off the note, then the lender takes the home and the debt is fully satisfied.

For federally backed loans, a borrower must be at least 62. The homeowner never owes more than the home is worth. And, in most cases, the lender can't call the note due while the owner is still in the house.