In certain situations, the right reverse mortgage can enable seniors to maintain their financing independence and an adequate standard of living. In other situations, however, seniors face devastating financial hazards in converting the equity in their home into cash. A new report from Consumers Union cautions against potentially high costs for obtaining a reverse mortgage and contract terms that can be complex and not fully disclosed. Costs can include origination fees, points, mortgage insurance premiums, closing costs, servicing fees, share equity or "maturity" fees and shared appreciation fees. In some cases, the costs are so high the homeowner ends up owing much more money than she borrowed. The report also warns of "financial counseling" services that are little more than a marketing effort on the part of the lender, potential adverse impacts on the senior's eligibility for government benefits and "estate planning" fee scams.

Source: "Reverse Mortgage-Risk or Reward?" Consumers Union, August 24, 1999. 

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