Reverse mortgage has been around for a couple of decades but it has not been very popular until only recently when Americans have witnessed the great financial depression of the 21st century that has eroded many people's wealth. Also coupled with the ever growing number of senior American, reverse mortgage has been getting more and more popular among these seniors. Further more, millions of American baby boomers who are born in the 1950s are expected to retire over the next decade, reverse mortgage will no doubt be one of the most sought after financial products around.

As such, before you apply for a reverse mortgage, you need to understand every single details regarding this financial product thoroughly. As with any financial products, there will sure be advantages as well as pitfalls, and so you will need to know the reverse mortgages pros and cons. Many financial institutions such as the banks consider reverse mortgage more of a insurance kind of products rather than a home loan product. That is mainly because this reverse mortgage product is harder to service compared to traditional mortgages and that not many consumers are comfortable with it as many regard debts as a bad thing. However, things have began to change recently. The popularity of this product has been growing steadily among senior Americans, and banks are now starting to see it as an opportunity. With reverse mortgage moving into the main street steadily year after year, logically it will soon become one of the common products around.

If you were to apply for a reverse mortgage, do understand the pitfalls first. You can read Is Reverse Mortgage Loan For You? to better understand about this product. I have listed 4 pitfalls below:

The costs of applying for reverse mortgage loan is high as there are many procedures, fees and charges involved. Homeowners are required to pay numerous fees such as origination fee, transaction fee, appraisal fee, credit report fee, service fee and other charges such as pest inspection, flood certification fee etc. which can run into several thousands dollars.

By acquiring a reverse mortgage loan, parents may not be able to pass down the family home to their child. Although the lender does not take the title of the house, the lender usually has a clause that requires the loan to be paid back over time with interest. Therefore, the repayment is actually made by selling the house and the lender gets the proceeds.

The terms of a reverse mortgage loan can be rather complicated and sometimes there could be a catch somewhere. Depending on the lender, some of them have terms which states that if the house is unoccupied for a specified period of time, the loan has to be repaid back. Be sure to read and understand all the terms carefully before you jump for one.

Upon acquiring a reverse mortgage, homeowner's ability to obtain future financing such as hire purchase loans, personal loans and even credit cards can be more difficult.