• A reverse mortgage offers advantages and disadvantages to homeowners.home image by Greg Pickens from Fotolia.com
  
  A reverse mortgage is a program that was originally created by the U.S. Department of Housing and Urban Development (HUD) as a means for seniors aged 62 or older to access the equity in their homes in the form of a loan. The loan typically does not have to be repaid until the homeowner passes away or the house is sold. Homeowners continue to be responsible for paying real estate taxes, maintaining the home and paying homeowner's insurance premiums.
  
  

No Income or Credit Requirements

• Unlike a traditional mortgage loan, there are no income or credit requirements for a reverse mortgage. Retirees on a fixed income can obtain a reverse mortgage, as can individuals with low credit scores or who have large amounts of consumer debt such as credit cards. Some homeowners use reverse mortgage proceeds to pay off existing debt.
  
  

Low Risk

• Since a reverse mortgage doesn't have to be repaid unless you move, sell the home or pass away, there is no risk of defaulting on the loan. According to NewRetirement.com, when the time comes, you or your heirs will only be required to repay an amount based on the full value of your home, even if the outstanding balance exceeds the home's value.
  
  

Freedom of Use

• NewRetirement.com also indicates that there are no limitations as to how reverse mortgage funds are used. Seniors can take a vacation, visit their children or grandchildren, buy a new car or simply enjoy having a financial cushion. For seniors who have been unable to save enough for retirement, a reverse mortgage can serve as a substantial source of retirement income.
  
  

Staying Put

• A disadvantage of a reverse mortgage is that your home must remain your primary residence. If you decide to sell the home and move, the outstanding balance must be repaid at that time. You must also repay the loan if you do not live in the home for a period of 12 consecutive months or longer.
  
  

Inheritance Issues

• ReverseMortgageDisadvantage.com reports that, because you are tapping into your home's equity to obtain the funds, a reverse mortgage will lower the equity, reducing the value of your estate. At the time of your death, your heirs may have to sell the home in order to repay the loan.
  
  

Higher Costs

• Since lenders often wait for several years to receive repayment on the loan, there are usually higher up-front costs with a reverse mortgage. Closing costs are typically higher than with a traditional loan, and you may be assessed greater fees.