Why Borrowers Default on Their Reverse Mortgage & How to Avoid It
Whether you have a traditional mortgage or a reverse mortgage, homeownership comes with huge financial responsibilities. If you fail to meet these obligations, you may face foreclosure, no matter which type of loan you have.
Home Equity Conversion Mortgages (HECM), have some additional obligations that borrowers are beholden to before they are in default.
- You must be current on property taxes, homeowners insurance, wind or flood insurance, and HOA dues or fees.
- You must maintain and repair your home.
- You must occupy your home as your principal residence.
To keep yourself from defaulting on your reverse mortgage, and facing possible foreclosure, follow these tips:
- Make arrangements to pay property taxes and other charges. If you missed a payment, make it immediately. If you are having problems making any of your payments, contact your tax authority, insurance company, and home owners association immediately to see if you can make payment installment arrangements.
- Make repairs to your home. If you are unsure what repairs are required, contact your reverse mortgage lender or servicer for a list. Be sure and hire a reputable contractor and make sure you get a written contract.
- Occupy your house. You are required to live in our house as your primary residence. Each year you must certify that you are indeed living in the home. If you did not receive the annual certification notice, or did not return it, contact your lender or servicer immediately.
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More on What You Can Do to Avoid Default
If you are having financial difficulties and cannot pay your property charges or home repairs, you may be eligible for assistance through your state Area Agency on Aging.
It is important to notify your lender as soon as you experience any financial or physical or mental health issues that could prohibit you from fulfilling your reverse mortgage loan obligations. For more advice on reverse mortgage loans, speak with a Certified Reverse Mortgage Professional.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.