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You may have already heard of the reverse mortgage but probably do not completely understand what it means. In this post, I try to present a clear explanation of what reverse mortgage is and what are some of the most important advantages and disadvantages.

Reverse Mortgage is a loan for seniors of age 62 years or older which involves the lender paying the seniors money depending on the home equity without having the owner sell the house or move out. The loan is paid by selling the house when the owner dies or moves to some other place.

While the program seems very attractive and beneficial, it does have some disadvantages and an individual must always consider both pitfalls and disadvantages of reverse mortgage before getting involved. Below are some pros and cons that will give you a better understanding of reverse mortgage and help you decide whether it is the right option for you.

Advantages:

1. The home owner does not need to make any monthly payments.
2. The owner does not need to pay until he/she dies or moves out.
3. The owner gets paid every month until he dies. He will still continue to get paid even after he has received more than what the house is worth.
4. The owner and his heir never have to worry about paying more than what the house is worth.
5. Qualification process is very easy.

Disadvantages:

1. There are a lot of general fees that might be a little high.
2. Being approved for reverse mortgage might compromise your ability to get approved for other federal programs like Medicaid etc.

The Home Equity Conversion Mortgage (HECM) loan van be extremely beneficial for old citizens but it does have disadvantages and it is vital to consider all the consequences before getting an hecm loan.