If you haven't heard by now, a reverse mortgage is a loan that converts home equity into tax-free cash for home owners aged 62 and older. These loans are hot. It seems like every celebrity is pitching them lately. Much has been touted in the media and by many lenders about the benefits to seniors of reverse mortgages. But here are some of the red flags. The upsides are great. The downsides can be ugly. Discuss these 13 red flags with family members and any lender you talk to. If you recognize these red flags you can avoid some common reverse mortgage problems.

Red Flag #1. Complicated paperwork may have unforeseen consequences. If you don't understand the document, you won't understand the consequences. Take the time to get proper guidance, second opinions, and a review of appropriate alternatives.

Red Flag #2. High cost of a reverse mortgage may outweigh the benefits of alternatives. As in any loan, there are going to be associated fees and costs. These should be clearly spelled out up front. Consult your lawyer, accountant, or other trusted adviser to review any loan application before making a major financial commitment like a reverse mortgage.

Red Flag #3. Uncertain benefits. The strange thing about reverse mortgages is that you cannot calculate the true cost of this loan because it depends on how long you are going to live. But, if you want to pass anything to your heirs, it's worth considering the alternatives. There is no way to predict the home appreciation and future interest rates so consider the reverse mortgage carefully. Yes, payments come to you tax free but the debt on that asset is going up. This may be fine as long as you live and as long as you live there. Again, just know your options.

Red Flag #4. Tight-lipped lenders. Lenders who don't fully disclose fees and terms are a big problem. As we've just seen in the sub-prime lending mess, many consumers didn't understand what they were getting into. Some sleaze-ball lenders have gone so far as to work themselves into the deal to gain a large percentage of the property's appreciation. Ask your lender if they are attempting to gain any percentage of the appreciation as part of their profit.

Red Flag #5. Forcing borrowers to buy additional financial products such as variable annuities. In this case, consumers can lose their principle and the earning potential of that money. Sometimes it's alright to combine financial products but if you do, please double check the terms with someone who understands both types of products.

Red Flag #6. Numerous front end and back-end fees can be exorbitant. Artificially inflated fees raise the cost to the borrower and deflate consumer benefits fast. Of course the definition of exorbitant is up for debate but that is a reason to educate yourself, get multiple loan proposals, and obtain professional and objective advice before signing any loan document.

Red Flag #7. Reverse mortgage counselors imply that they are there to protect the interest of the seniors applying for the loan. This may be legitimate but if they present themselves as a counselor yet, have an affiliation with the lender; there is an inherent conflict of interest. Unfortunately the government still allows this practice. Hey, face it, your tax adviser isn't on the payroll of the IRS is he? Well then your reverse mortgage counselor should not work for the lender he is trying to protect you from.

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