When you take out a reverse mortgage, you remain the owner of the home just as in any traditional mortgage. So, you are still liable to pay the property taxes, homeowner insurance and making home repairs. In case you fail to pay them off, the lender may demand repayment of the loan.
Is there any chance of default?
Reverse mortgages are quite safe as there's no chance of default because you aren't making monthly payments. And the loan needs to be paid off by your heirs when you die. This can be done by selling or refinancing the home. But the home value has to exceed what you owe. Otherwise, the heirs can simply pay off the debt and retain the home.
Can the lender claim more than property value?
Moreover, when the lender sells off property in order to get back the money he has invested, any extra proceeds exceeding the home value is handed over to the borrower or his heirs. However, it may happen that the sale proceeds aren't enough to satisfy the debt. In such a case, the lender cannot claim more than what the property is valued at the time of its sale. This is because reverse mortgage is a non-recourse loan. So, the lender may not come after your income and assets or ask you heirs to pay off the remaining balance.
Thus, reverse mortgages are quite safe as there are no chances of default and the lender won't come after you and claim more than the value of your property.
Reverse Mortgages - How seniors tap equity for extra cash