Pros - no payments so seniors can live with a much larger cash flow than a traditional mortgage can offer.  Qualifying isn't as tough as a traditional mortgage.  Gives cash strapped seniors an option when SSI or other income sources aren't cutting it realistically or allowing them to live comfortably.  Allows seniors to remain in their home rather than being forced to sell due to finances.

Cons - negative amortization is a major issue if the borrower wishes to leave a property or property proceeds to heirs, OR has a change in financial circumstances where a reverse wouldn't be necessary any longer.  Costs for a reverse are higher than a standard loan.  Taxes & insurance still need to be paid regularly on a property.  Many lenders jack up rates/fees to cash in on this product, which until recently, was not tightly regulated.

Good morning Margaret. We do them, but only when it is the right solution for the clients. It is not for everyone, but when it's the right property and there are not enough dollars available to make the transaction work, it could be the right solution.

Hello Margaret, thanks for finding my post on the topic!  I definitely see pros and cons.  For the right person they might be a perfect fit, but I suspect for most clients they'll steer clear.  http://activerain.com/blogsview/4818648/using-a-reverse-mortgage-to-purchase-your-cincinnati-patio-home#19861627

I'm glad to see mortgage experts John Meussner and Joe Petrowsky add their knowledge and expertise.  That's one of the many great things about ActiveRain.   

I'm anti reverse mortgage.  I see lots of foreclosures from them and have seen people who lived in the home, but were not on the mortgage left homeless.  I see zero pros

The borrower must take a class or meet with a counselor to make sure they understand purchasing using a reverse mortgage.  

Reverse mortgage is an FHA product, so if the buyer is planning to buy in a condo community, the community must be FHA approved.

The borrower does not receive payments, but they do not make payments either  though they are responsible to pay taxes, insurance and HOA fees, if any.

There's a negative amortization component and some people worry there won't be anything left for their grown children.  The grown children should assure their parent(s) that they do not want or expect any money from their parents.  It's kind of selfish to expect an inheritance.  

since its FHA its costly with upfront PMI

I have only had 1 purchase where they used a reverse mortgage to purchase it. Most are owners who own outright, want to stay in their home but need money to live 

I have not done one but I don't see where there should be much of an issue.  There is a payoff just like any mort.

I have done Reverse Mortgages Margaret Rome, Baltimore Maryland for a number of clients for purchases and in refinance situations where it was a better option.   John Meussner gave you an excellent overview but clients are unique and so is this product.   There are other pros and cons not mentioned here so you should be sure your clients have a COMPLETE understanding for their unique financial situation from a professional lender before going forward.

John Meussner provides a great explanation of the general pros and cons of Reverse Mortgages below, Margaret Rome, Baltimore Maryland ... For some, Reverse Mortgages are a godsend.  They can be crippling financially for others.  It's why it's so important that the specific pros/cons of entering into this type of financing are found through intensive consultation(s) with an experienced Reverse Mortgage Originator and Lender.  That importance can't be overstated ...

Gene 

good questions and I loved reading the answers....thanks, Margaret....

Never had to deal with type of financing.

Good morning Margaret Rome, Baltimore Maryland Good advice from Joe Petrowsky and John Meussner 

So many little issues with doing one of these, I've stopped figuring it out and just send any interested client to a great rm lender and then take it from there.

 Good morning Margaret Rome, Baltimore Maryland . Good question! I enjoyed reading the answers.

This is a complicated subject that cannot be addressed in a few sentences.  A pro or con in one situation may be the opposite in another situation.

I am not an expert but it removes equity. This may be good for someone who has no one who is going to inherit their property?

I am not a lender, but see there are some that have answered.  Had one family do a reverse mortgage after they had gone through a short sale.   They got approved and wasn't even a full year.

Margaret, the major con I've encountered is difficulty getting good information on how these loans work.  They sound like an interesting option for people who want to stay in homes that are not paid off, but that have a lot of equity.

I love John Meussner comment..great explanation!! Short version!

I have only seen one, and it did not work out well for this older couple.

Personally, I only know of one person who has done this and it is my Sister and she regrets it already.  She didn't say why.

John Meussner gave you a great summary, Margaret. Buyer be (a)ware when it comes to reverse mortgages!

The fees are huge on these.

The challenges seem to take place at the end or to the estate afterwords

You must carefully consider the needs and resources of the prospective borrowers. No mortgage payments for life and a better quality of life are the benefits when the product meets the needs.

parked and reading

Fairway Mortgage keeps running seminars on this . My current understanding is it's a good way to purchase a condo in FL  !(to be a snowbird).