What are my responsibilities as a reverse mortgage loan borrower?
There are three main requirements that you must fulfill if you have a Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage loan. If you don’t meet these requirements, you could lose your home to foreclosure.
As a reverse mortgage borrower, you have three main responsibilities:
- You are required to pay your property charges—such as property taxes and homeowners insurance—on time.
- Your home must be kept in good repair.
- Your home must be your principal residence.
Pay your property taxes and homeowners insurance on time
Before closing on the loan your lender will do a financial assessment to determine how you will pay for your ongoing property taxes and homeowners insurance, and if applicable, flood insurance.
Paying property charges for loans after April 27, 2015
If your lender determined that you had enough money to pay future property taxes and homeowners insurance, you can choose to:
- Pay your property charges directly, or
- Have your servicer pay your charges by using money from your reverse mortgage funds.
If your lender determined that you need to “set aside” a portion of your loan proceeds as a reserve to pay your property taxes and homeowners insurance, your lender will choose to:
- Pay your property taxes and homeowners insurance directly from the reserve, or
- Send you the money so that you can make these payments.
For loans that were made before April 27, 2015, you could have requested at the time the loan documents were signed that your lender or servicer pay the property taxes and homeowners insurance from the reverse mortgage loan funds. You were not required to do so. Generally, for reverse mortgages made before April 27, 2015, borrowers need to budget each year to make sure their taxes and insurance are paid on time.
If you are unsure if loan money was set aside, check your monthly account statement or contact your lender or servicer.
If the reserve can no longer cover your property taxes or homeowners insurance, your lender will tell you.
Keep your home in good repair
After closing you must keep your home well maintained. Your lender or servicer may inspect your home’s condition if they give you notice and specify the purpose of the inspection. They also may tell you to make repairs. Generally, you have 60 days to start repairs from the day your lender or servicer told you to do so. If you cannot afford to make required repairs, reach out to your local Area Agency on Aging (AAA) to find assistance programs that may be able to help you pay for repairs. To find the nearest AAA, call (800) 677-1116 or visit eldercare.acl.gov.
Caution: Beware of contractors who approach you about getting a reverse mortgage loan to pay for repairs to your home. Learn about all your options. Do not let yourself be pressured into borrowing money for home repairs.
Live in your home as your primary residence
Your home must be your principal residence, meaning it must be where you spend the majority of the year. You can only have one principal residence at a time. With a reverse mortgage you can only be away from your home for a certain period of time.
- If you are away for more than two months, but less than six months, and there is no co-borrower living in the home, notify your lender or servicer so that your lender knows you continue to occupy the home as your principal residence.
- If you are away for more than six months for non-medical reasons and there is no co- borrower living in the home, your home is no longer your principal residence and your loan must be paid back or satisfied through selling the property or deed-in-lieu of foreclosure. Anyone living with you will have to move out unless they are able to pay back the loan.
- If you are away for more than 12 consecutive months in a healthcare facility such as a hospital, rehabilitation center, nursing home, or assisted living facility and there is no co-borrower living in the home, your home is no longer your principal residence and your loan must be paid back or satisfied through selling the property or deed-in-lieu of foreclosure. Anyone living with you will have to move out unless they are able to pay back the loan or qualify as an Eligible Non-Borrowing Spouse.
- If there is a co-borrower in the home and you permanently move for any reason, the co-borrower may continue to live in the home and receive loan payments, so long as they continue to fulfill the reverse mortgage loan requirements.
Note: This information only applies to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.