Despite the great benefits, there are in fact reverse mortgages cons that one has to be cautious about. There is the possibility that the total accumulated payouts received by the borrower will exceed the actual equity of the home upon repayment. This is why the initial and upfront fees are extremely steep compared to regular mortgages.
Ownership of the home is retained by the borrower. The owner is then still burdened to pay property taxes, property insurance and even mortgage insurance. The last insurance policy is a necessity for the benefits of the lenders. It will cover for any losses the lender may acquire upon the repayment of the loan in the event that the equity of the property has significantly decreased.
One of the foremost conditions to continue receiving monthly payouts is that the home is maintained as the principal residence of the borrowers. Generally speaking, the mortgage only comes into maturity or becomes due when the last of the borrowers dies or when the house is sold. There are other instances that lenders consider to be the signal of the maturity of the loan, such as prolonged hospitalization or confinement to rehabilitation centers and even nursing homes.
The fact that the lump sum repayment will never exceed the actual home equity value works both as a pro and a con. The heirs will not be left with the burden of having to pay a debt but they will neither stand to inherit anything from the selling price. There have only been few instances that the equity value exceeded the total mortgage repayment amount. In cases like this, the excess goes to the heirs.