Top 5 reverse mortgage mistakes

If you're a senior citizen who owns a home with equity, you may have heard some buzz about reverse mortgages. Increasing in popularity and attention, reverse mortgages are for homeowners 62 and older. The benefits of reverse mortgages are high, but so are the risks.

Basically, reverse mortgages mean no monthly payments are due until you die, move or sell the home, at which point, the loan is due in full, complete with interest and fees. In fact, you can receive monthly income from a reverse mortgage as long as you live in your home.

The idea of a mortgage-free existence and higher income leads seniors to envision a cushy retirement. However, the upfront costs are higher for reverse mortgages than for typical mortgages, and if you don't handle this right, you could lose a lot at a time when you can least afford to.

Here are the five biggest mistakes to avoid when looking into reverse mortgages:

Reverse Mortgage Mistake #1: Underestimating reverse mortgage fees. Frankly, reverse mortgages are expensive loans. Closing costs for reverse mortgages are high; origination fees can be double that of conventional mortgages. Plus, you have to pay HUD mortgage insurance upfront. For that reason, reverse mortgages are usually less a luxury than a last resort. If you can't afford the insurance, taxes and maintenance of your property, even with the payout you're getting, a reverse mortgage is not for you.