Some people are in search of a quick summary of reverse mortgage pro and cons. For these searchers, here is an overview:

PROS

- geared for senior citizens wanting to remain in their homes - i.e. “age in place”
- lender make payments to you; you are not required to pay loan back until house is sold or owner dies;
- “non-recourse” loan - you’ll never owe more than the value of your home, no matter how large the reverse mortgage loan balance grows;
- no income or credit score qualifications;
- very flexible payment options (lump-sum, annuity, credit line, or combination);
- loan proceeds are not taxable income;
- loan proceeds can be used for any purpose;
- closely monitored lending system reduces opportunities for fraudulent or predatory lenders;
- required counseling sessions prior to taking out reverse mortgage;
- allows elderly homeowners to liquify home equity and enhance their living standards;

CONS

- complicated and counterintuitive type of loan for most; requires considerable study by borrower to make an informed decision;
- high origination fees and closing costs relative to amounts that can be borrowed;
- amount that can be borrowed is based largely on the age of homeowner (older = shorter expected life = can borrow more) and tends to be less than many homeowners anticipate;
- variable interest rate on most reverse mortgage products creates uncertainty as to the amount that can be borrowed and that will come due. In a rising rate environment,home equity can quickly be eaten away;
- may interfere with bequest/inheritance plans;
- interest is tax-deductible but since it is paid only when loan is due (i.e. death or sale of home), deduction has limited value;
- home must be debt free or nearly so - in some cases an existing mortgage balance can be retired with reverse mortgage proceeds;
- reduces future flexibility and living choices - loan makes financial sense only if plan is to stay in the home for long-term;
- psychological hurdle of accepting increased debt/reduced equity after lifetime of working to pay off debt and increase equity;
- can negatively impact Supplemental Security Income (SSI) or Medicaid benefits in some situations;
- federal limits on amounts that can be borrowed limit the utility of reverse mortgages especially in high-cost housing areas;
- federal limits on number of loans that can be issued and the limited number of counselors available in some parts of the country can mean long delays in the application/approval process;

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