The main disadvantage of a reverse mortgage is that it is more expensive than a conventional mortgage. This is primarily due to the high fee charged for this type of mortgage. However, since the amount of fee is rolled into the loan amount, you will not be required to pay it upfront at the time of taking this mortgage. A number of unscrupulous service providers charge potential customers for any advice that they offer on this type of mortgage. You should avoid such financial advisors and approach only those companies that enjoy the US Department of Housing and Urban Development (HUD) approval. Taking this loan is a bad idea if you plan to move in the near future.
Since a reverse mortgage agreement transfers the ownership of the home to the lender, you should sign it only after assessing your need for it and after consulting a professional advisor. You should also consult your heirs about your decision to take this mortgage and consider their opinions as well. This is important, as your decision to take this loan will leave them with a smaller legacy. You should weigh the cost of the loan against its benefit and decide accordingly. In most cases, taking this mortgage is seen as a last resort for a homeowner who is in urgent need of money. Apart from adding to the debt, another disadvantage of a reverse mortgage is the high brokerage cost that it comes with that burns a hole is the pocket of the borrower.