Reverse Mortgages: Property Taxes and Insurance

News stories about reverse mortgages sometimes aren’t very flattering. As a program meant to help seniors age in place, it is unfortunate when you hear stories about some of them having their homes foreclosed on. However, sometimes the news fails to mention some facts about some of these foreclosures.

Some of these foreclosures that come from a reverse mortgage loan happens because the borrower is no longer able to keep up with their obligations to their lender. When obtaining a reverse mortgage, borrowers must understand the reverse mortgage program and how it works. With a reverse mortgage, homeowners who are 62 years and older are able to turn some of the equity in their home into cash, without being required to make monthly payments to their lender.

It is important for borrowers to understand that it is a requirement for them to continue to pay for their property taxes, HOA fees and insurance.  This is no different than requirements for any other mortgage. However, unlike a traditional mortgage, you are not required to make monthly payments to the lender to repay your loan, unless you choose to do so.

Upon initial contact with a loan officer or reverse mortgage specialist, borrowers should be told about the reverse mortgage program, including understanding events which are events that will force the reverse mortgage into repayment. A benefit of a reverse mortgage, is that there is no maturity date on the loan. Instead, if a maturity event were to occur, then the loan would become due. Some of these maturity events include that borrowers are required to continue paying for taxes, insurance and HOA fees on their home. [Watch this video about the maturity events here.]

Before borrowers are able to put in their application, they are to undergo a third-party reverse mortgage counseling session. At the hour-long session, their counselor would go over the reverse mortgage program with them and to make sure that they understand how the reverse mortgage program works, and also discuss other options that may be available to them. A third-party counselor is beneficial because their job is to ensure that you are aware of how the reverse mortgage program works.

Read Related Articles:

Reverse Mortgage: Pros & Cons

5 Reverse Mortgage Facts

If you have any questions, please feel free to comment below or to call 1-888-808-8486.

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