• A reverse mortgage is a special type of product that uses the equity in your home to create accessible cash. These mortgages can seem like a good deal because they provide money in installments or a lump sum you can use to pay bills or meet other expenses. The disadvantages of reverse mortgages are significant, however, and reveal that reverse mortgages may not be as financially beneficial as some lenders portray.
  
  

Expense

• When you take out a reverse mortgage, your lender agrees to give you a loan based on your equity. You are not obligated to pay this loan back until you move, die, or sell your house. This means that the lender has to wait a long time to get any money from you and takes on a big risk. To make this worth it, the lender charges high interest or origination and closing fees. These costs can be thousands of dollars and that this can negate the benefits of having the mortgage.
  
  

Impact on Equity

• A reverse mortgage reduces the equity in your home, leaving you with less to give to your heirs as inheritance. Even if you are comfortable with decreasing what you can give, your heirs may feel cheated. Additionally, to qualify for a reverse mortgage, you typically have to have a lot of equity to begin with to make the loan worth it. This is because equity does not reflect the total value of your home; equity is the difference between your home's value and the amount (if any) you own on the property. Lenders can't really provide you with the value of the home because otherwise they'd essentially be buying your property.
  
  

Flexibility

• Reverse mortgages lock you into staying into your home. If you don't, the full amount of the loan will become due. This decreases how flexible you can be in where you live. This particularly is a problem if you experience additional financial difficulties that make maintaining your property too expensive.
  
  

Low-Income Assistance

• Payments from a reverse mortgage may be counted as income for some (not all) low-income assistance programs. This means that getting a reverse mortgage may disqualify you from getting other forms of financial help.
  
  

Building Debt

• Lenders add interest to the lien(s) on your property. As a result, you increase debt over the course of the loan rather than paying it down.