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Since reverse home mortgages work different than a traditional home loan, you want to understand the major pitfalls of a reverse mortgage. Learning of these problems in advance can spare you hundreds of dollars over the course of the mortgage.

Jul 14, 2008
As a starting point, you want to consider that no all reverse mortgages are the same. Before applying for a reverse mortgage, you need to ensure that you are choosing the correct kind. The 2 major types are the private reverse mortgage and the FHA backed reverse home mortgage.

With a private reverse mortgage, there are basically no limits on how much you can be charged. Whenever you hear of bad stories of people who applied for a reverse home mortgage and ended up paying way too much is because they picked out this kind of home loan. Keep away from this home loan.

With a FHA backed seniors reverse mortgage, there are many laws that lenders must follow. FHA oversees this kind of reverse home mortgage and constrains the costs that lenders may charge you. Obviously, you invariably want to apply for this kind of reverse home mortgage.

Similarly, with a FHA backed reverse mortgage, you have the right to a no-cost advising session. During this session, you may ask all the questions you have. Write down all your concerns before the session so that you do not forget later on. Take full advantage of this session.

Another one of the pitfalls of a reverse mortgage is when a mortgage lender is too eager for you to apply for a reverse mortgage in order to pay for something else: a second house, an investment, etc. Normally, be careful of lenders who appear to be way too eager about you applying for the home loan.

Moreover, keep in mind that even though you won't have to make any recurring payments, you are nevertheless responsible for the regular fees related with the title of a home: real estate taxes, regular maintenance, insurance, etc.

You may choose to use a portion of the money you get from the reverse mortgage to pay for these costs. This way, you can ensure that you will stay in your home for as long as you choose.

Furthermore, a reverse home mortgage may not be the cheapest solution for you. You may contemplate to refinance or to sell the home. Naturally, a reverse home mortgage may be the best answer for you if you want to live in your home and do not want to pay any monthly payments or if you need a consistent "second income."

In conclusion, always choose a FHA approved reverse mortgage lender. In addition, keep adequate funds to pay for the maintenance fees and make sure that a reverse home mortgage is the most inexpensive or more appropriate solution for you. In this way, you can be sure to minimize the pitfalls of a reverse mortgage.
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