Do I still need to pay my property taxes and homeowner’s insurance with a reverse mortgage loan? What about the costs of repairs needed to maintain my home?

Answer:

Yes. If you don’t  pay your homeowner’s insurance and taxes, or make needed repairs, you can lose your home to foreclosure.

Most reverse mortgages are Home Equity Conversion Mortgages (HECMs). The Federal Housing Administration (FHA), a part of the Department of Housing and Urban Development (HUD), insures HECMs.

Note: This webpage has information about HECMs, which are the most common type of reverse mortgage. 

With a HECM, if you don’t pay your insurance and taxes, or if you allow the condition of your property to deteriorate without making the repairs needed to maintain your home, you will be considered in default on your loan. If you don’t work with your lender to resolve the situation, the lender could foreclose on your home, and you could be forced to move. Learn more about what to do if you are having trouble paying your taxes and insurance or the cost of maintaining your home.

When you apply for a HECM, the lender does a financial assessment at the time of application to help determine your ability to pay taxes and insurance from retirement income or savings. If you do not have enough other resources, the lender may set aside some of the reverse mortgage proceeds to pay these expenses in the future. A “set-aside” is a portion of your loan that is reserved to pay some property taxes, homeowner’s insurance, and fees. 

Set-asides help make sure you’ll have the funds to make these payments in the future. But be aware that you could face foreclosure if you run out of money to pay property taxes, insurance, or other property-related expenses in the future, even if you have a set-aside account.


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