I‘ve been seeing many more ads for reverse mortgages lately, not surprising as lenders try to target the ever growing group of aging boomers sitting on a potful of equity in their SoCal properties.

Before you sign up for one of these very complicated financial instruments, make sure you read the fine print and understand how repayment of the loan works, so you can tailor it to your personal needs.

The Department of Housing and Urban Development (HUD) rolled out changes in October designed to improve the financial health of the federally insured mortgage program, Home Equity Conversion Mortgage (HECM), which has suffered losses in recent years.

If you have been thinking of tapping the equity in your home as part of a longterm retirement strategy, here’s what you need to know.

Areverse mortgage is available to seniors 62 and older who own their homes outright or have small existing mortgage balances. The amount you can borrow depends on your age, property value and interest rates.

Older borrowers with more valuable properties are typically eligible to borrow the most. Areverse mortgage can allow you to take lump sum withdrawals, regular monthly payments, or a line of credit to access when needed. The loan does not need to be paid off until you die, sell the house or move out.

The federal government has insured more than 1 million reverse mortgages since the program began in 1989, and new HUD secretary Ben Carson said changes were necessary to keep it afloat for the future.

New rules effective last month increased the mortgage insurance premiums paid upfront from 0.5% of the appraised value of the home to 2%. Mortgage insurance premiums paid over the life of the loan decreased from 1.25% to 0.5%, reducing the effective mortgage rate.

Loan limits under the new rules were tightened, and the average borrower at current interest rates will now be able to borrow roughly 58% of the value of their property, down from 68%.

Seniors who choose a reverse mortgage to help them age in place should recognize that it doesn’t give you a pass on property expenses and maintenance. Property taxes and insurance payments must be kept current.

Changes to the HECM were made a few years ago to help prevent borrowers from going into default and losing their homes due to non- payment of property taxes. Your responsibilities as a homeowner will continue to require reserve funds to maintain roofs, plumbing, and all other major systems of the property along the way.

Adriana Donofrio Podley Properties Glendora (626) 926-9700 adrianad@podley.com