At the height of the housing market, many homeowners watched as their home value soared and envisioned a retirement eased by the equity in their property. When the housing bubble burst, many homeowners experienced a drop in home value as well as a crisis of confidence in the ongoing value of their real estate.

But, depending on when you purchased your home and how long you have been paying your mortgage, you may still have plenty of equity in your property even if home values have decreased in your area. In fact, according to the 2009 American Community Survey, 32 percent of homeowners own their home without any mortgage at all.

So what can you do with this equity?

Options for senior homeowners:

1. Reverse mortgage. For seniors age 62 and older who have equity in their property, a reverse mortgage may be an option to consider now or in the future. If you are retired and are concerned about a lack of accessible cash, one option is to consult with a reverse mortgage counselor to evaluate the pros and cons of using a reverse mortgage to establish a line-of-credit for emergencies or to generate a steady flow of income.

You can also use a reverse mortgage as a lump sum to pay off other debt in order to create cash flow. You will need to continue paying your homeowners insurance and property taxes even if you have a reverse mortgage on your property, but as long as those are continually paid you cannot lose your home. The reverse mortgage is repaid when you pass away or sell your home.

2. Paying off mortgage. Financial planners often debate the merits of paying off your mortgage in full before retirement. While some financial planners recommend retiring your mortgage before you retire, others say that low mortgage rates offer inexpensive financing options. Continuing to pay a mortgage offers tax benefits and allows you to use your assets for other investments, according to Gene Amromin, a senior financial economist in the financial-markets group at the Federal Reserve Bank of Chicago, quoted by Smart Money magazine.

The decision to keep making your monthly mortgage payments or to pay the loan in full depends on your assets and the size of your mortgage, but you should be sure you are adequately saving for retirement. One option is to use a reverse mortgage to pay off your current home loan. The amount of money you have been spending on your housing payment could then be used for investments and daily expenses.

3. Downsizing. One of the most important decisions when retiring is where to live. If you would prefer to live in a smaller home or one which requires less maintenance, you may want to consider using a reverse mortgage for purchase on a new home. You can use the profit from the sale of your current home to purchase another property, then immediately take out a reverse mortgage so that you continue to have access to the cash you used for the purchase.

4. Aging in place. If you would rather stay in the home you already own but are concerned about future maintenance costs, a reverse mortgage could be helpful. You can use one for monthly income, as a lump sum to make a major repair or for a line-of-credit to access only when needed. Another option you might want to consider is bringing in a friend or relative to share your home. Not only does this offset the cost of homeownership, but you may find extra residents helpful when it comes to maintenance projects.

Regardless of what you decide to do with your home and your mortgage, consulting with a reverse mortgage lender about how this loan product might fit into your financial plan is a good first move.

Michele Lerner

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her clients include The Washington Times, Urban Land Magazine, NAREIT's Real Estate Portfolio, and numerous Realtor association publications. Michele's first book, "HOMEBUYING: Tough Times, First Time, Any Time" is available now at Amazon.com or from www.MicheleLerner.com.

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