Your Duties When You Have a Reverse Mortgage
Understand the ongoing duties, risks, and key decisions that come with using a reverse mortgage to tap your home equity.
A reverse mortgage can allow older homeowners to turn home equity into cash without making monthly mortgage payments, but it also comes with ongoing responsibilities that you cannot ignore. Failing to meet these duties can cause the loan to go into default and put your home at risk of foreclosure.
This guide explains what you are expected to do after you take out a reverse mortgage, how to stay in good standing with your lender, and what happens if you move, enter long-term care, or pass away.
1. What a Reverse Mortgage Really Means for You
Most reverse mortgages in the United States are Home Equity Conversion Mortgages (HECMs), insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). Instead of making payments to your lender each month, you receive money based on your home’s equity. Interest and fees are added to your loan balance over time.
Even though you do not make traditional mortgage payments, you still have crucial obligations related to your home and your loan. These responsibilities are written into your loan documents and must be followed for the entire time the reverse mortgage is in place.
Key ongoing obligations
- Use the home as your principal residence.
- Pay all required property charges (taxes, insurance, and certain fees) on time.
- Maintain the home in reasonably good condition.
- Respond to your lender’s occupancy certifications and other requests.
- Notify your lender when you move out, sell the home, or if the last borrower dies.
2. Keeping the Home as Your Principal Residence
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To keep a HECM reverse mortgage in good standing, the property must remain your principal residence, meaning you live there for the majority of the year and consider it your main home.
What counts as a principal residence?
- You physically live in the home most of the time.
- Your mailing address, voter registration, and official records typically match the property address.
- You do not permanently move to another home or facility.
If you permanently move out—whether to another house, to live with family, or to a long-term care or assisted living facility—the reverse mortgage becomes due and payable once the last borrower no longer occupies the home as a principal residence for more than 12 consecutive months in the case of a medical move.
Annual occupancy certification
Lenders or servicers send an annual form asking you to confirm that you still live in the property. Signing and returning this certification is not optional—it is part of your responsibilities as a borrower.
- Review the form promptly when you receive it.
- Sign and return it by the deadline indicated.
- Contact your servicer if you are unsure how to complete it.
If you ignore occupancy certifications, your lender may treat this as a potential default and begin steps that could lead to foreclosure.
3. Paying Property Taxes, Insurance, and Other Charges
Even though you are not making monthly mortgage payments, you are still responsible for all property-related charges. This requirement is one of the most common reasons reverse mortgage borrowers fall into default.
Typical property charges you must pay
- Property taxes assessed by your local government.
- Homeowners insurance to protect against losses like fire or wind damage.
- Flood insurance if required based on your location or lender rules.
- Ground rent, if the home is on leased land.
- Condominium, cooperative, or homeowners’ association (HOA) fees and any special assessments.
Life Expectancy Set-Aside (LESA)
For newer HECM loans, the lender must evaluate your ability to keep paying taxes and insurance over time. If the assessment shows a higher risk that you may struggle with these costs, the lender may require a Life Expectancy Set-Aside (LESA). A LESA is an account funded from your reverse mortgage proceeds that is used specifically to pay property charges.
Depending on your loan terms, either:
- The servicer pays the property taxes and insurance directly from the set-aside, or
- The servicer sends you funds from the set-aside so that you can make the payments.
If the set-aside runs out, you are once again directly responsible for paying all property charges on time.
Consequences of not paying property charges
- Your loan can be declared in default.sup>
- The lender may advance funds to cover unpaid amounts and add them to your loan balance.
- If the problem is not resolved, the lender can start foreclosure proceedings.
4. Maintaining the Property in Good Condition
Reverse mortgage borrowers must keep the property in a condition that meets FHA’s minimum property standards and local codes. You are not expected to make luxury upgrades, but you must ensure the home remains safe, sound, and sanitary.
Examples of required maintenance
- Repairing significant roof leaks and water damage.
- Fixing broken windows or exterior doors that compromise safety.
- Addressing serious plumbing, electrical, or heating issues.
- Keeping the property reasonably free of debris, pests, and health hazards.
If the lender inspects the property and finds major, unresolved problems, it may require you to complete repairs within a specified time. Failing to do necessary repairs can be treated as a violation of your loan obligations and may eventually lead to default.
5. When the Reverse Mortgage Must Be Repaid
Reverse mortgage loans do not last forever. Certain events trigger the loan to become “due and payable.” At that point, the balance must be repaid, usually from the sale of the home or other available funds.
| Trigger Event | What It Means | What Usually Happens Next |
|---|---|---|
| Last borrower dies | The borrower and any borrowing spouse have passed away. | Heirs can repay the loan (often by selling) or let the lender foreclose. |
| Permanent move | You permanently relocate to another residence. | The loan becomes due; the home is usually sold to pay it off. |
| Long-term care stay | Last borrower is in a medical or care facility for more than 12 consecutive months. | The lender may call the loan due once the home is no longer your principal residence. |
| Sale of the home | You sell the property securing the loan. | Reverse mortgage is paid off from sale proceeds at closing. |
| Failure to meet loan obligations | Nonpayment of taxes/insurance, serious disrepair, or occupancy violations. | Lender can declare default and ultimately foreclose if issues are not resolved. |
What your heirs should know
- HECMs are non-recourse loans: neither you nor your heirs owe more than the home’s value when the loan is repaid, even if the balance is higher.
- Heirs usually have a limited time (often about six months, with possible extensions) to decide whether to sell the home, refinance, or allow foreclosure.
- Heirs should contact the lender promptly after the borrower’s death to understand their options.
6. Spouses and Other People Living in the Home
Your responsibilities affect not just you but also anyone who lives with you. It is important that spouses and family members understand what happens if you move or die.
Co-borrowing spouse
If your spouse is a co-borrower on the reverse mortgage and continues to live in the home, the loan does not automatically become due when one borrower dies or moves out. The surviving co-borrower may keep living in the property and continue to receive payments as long as all loan obligations are met.
Eligible non-borrowing spouse
In some HECM loans, a spouse may be identified as an Eligible Non-Borrowing Spouse. This spouse is not a borrower, but may have the right to remain in the home after the borrower moves into a healthcare facility for more than 12 consecutive months or dies, if certain conditions are met under HUD rules.
- The spouse must have been properly identified in the loan documents.
- The spouse must continue to live in the home as a principal residence.
- The spouse must certify ongoing residency and meet all property charge and maintenance obligations.
- Reverse mortgage payments to the spouse usually stop, even though they can stay in the home.
Other household members
Adult children, roommates, or other relatives who live in the home but are not borrowers or eligible non-borrowing spouses generally do not have an automatic rights to stay once the last borrower dies or permanently leaves. They may remain only if:
- The loan is fully repaid from other funds, or
- They purchase or refinance the home into their own names.
7. Avoiding Default and Foreclosure
A default occurs when you fail to meet one or more of the reverse mortgage requirements, such as paying property taxes or maintaining the home. If you are at risk of default, the earlier you act, the more options you usually have.
Common warning signs
- Struggling to pay property taxes or insurance bills when they are due.
- Receiving written notices from your lender about missed payments or property condition.
- Ignoring or misplacing occupancy certification forms.
Steps to take if you fall behind
- Contact your lender or servicer immediately to explain your situation.
- Ask whether a repayment plan or other workout option is available.
- Request help from a HUD-approved housing counseling agency—counselors can help you understand your choices and communicate with your servicer.
- Discuss your situation with an attorney, especially if you receive a foreclosure notice.
At-risk extensions
In some hardship situations, older borrowers may qualify for an “at-risk” extension to delay foreclosure. For example, HUD guidance allows certain extensions for borrowers age 80 or older who have critical circumstances such as a long-term disability or terminal illness and a strong need to remain in the home. These arrangements are not automatic; they must be requested and renewed with documentation.
8. Practical Tips to Stay in Good Standing
Staying organized and proactive can help you meet your responsibilities and protect your home.
- Create a property charge calendar
Mark due dates for property taxes, insurance premiums, HOA dues, and other recurring charges. - Set up separate savings for housing costs
Even with a reverse mortgage, you may want a dedicated account for taxes, insurance, and maintenance. - Open and read all mail from your servicer
Respond quickly to occupancy certifications, notices, and requests for information. - Keep records
Save receipts, tax bills, and insurance declarations to prove you are current if questions arise. - Talk with family and heirs
Let trusted relatives know you have a reverse mortgage and explain what will happen when the loan comes due.
Frequently Asked Questions (FAQs)
Q1: Do I ever have to make monthly payments on a reverse mortgage?
A: Under a standard HECM reverse mortgage, you are not required to make monthly principal and interest payments, but you may choose to do so voluntarily. You must still pay property taxes, homeowners insurance, and other property charges on time.
Q2: Can I lose my home even if I never miss a traditional mortgage payment?
A: Yes. With a reverse mortgage, the main reasons for foreclosure are different: failure to pay property taxes or insurance, serious neglect of the home’s condition, or no longer using the home as your principal residence can all cause the loan to go into default, even though you are not making monthly mortgage payments.
Q3: What happens if I decide to sell my home?
A: When you sell the home, the reverse mortgage becomes due. The loan balance, including interest and fees, is repaid from the sale proceeds at closing. Any remaining money after paying off the loan and selling costs belongs to you (or your estate).
Q4: Will a reverse mortgage affect my Social Security or Medicare?
A: Generally, HECM reverse mortgage advances are considered loan proceeds, not taxable income, and they typically do not affect eligibility for Social Security retirement benefits or Medicare. However, needs-based programs such as Medicaid or Supplemental Security Income (SSI) can be affected if you hold large cash balances, so you should consult a benefits specialist.
Q5: Where can I get trustworthy help if I am confused or behind on my obligations?
A: You can speak with your loan servicer, contact a HUD-approved housing counseling agency, or reach out to legal aid or an elder law attorney. HUD-approved counselors are specifically trained to explain reverse mortgage rules and options and to help resolve problems before they lead to foreclosure.
References
- You have a reverse mortgage: Know your rights and responsibilities — Consumer Financial Protection Bureau. 2022-08-01. https://files.consumerfinance.gov/f/documents/cfpb_reverse_mortgage_rights_responsibilities.pdf
- Reverse mortgage requirements: A complete guide — Rocket Mortgage. 2023-05-15. https://www.rocketmortgage.com/learn/reverse-mortgage-requirements
- 2017 Colorado Senior Law Handbook, Chapter 20: Reverse Mortgages — Colorado Bar Association. 2017-01-01. https://www.cobar.org/portals/cobar/repository/SLH/chap20.pdf
- Reverse Mortgages — TexasLawHelp.org. 2022-03-10. https://texaslawhelp.org/article/reverse-mortgages
- Reverse Mortgages — Federal Trade Commission, Consumer Advice. 2023-02-27. https://consumer.ftc.gov/articles/reverse-mortgages
- Reverse Mortgages — Georgia Consumer Protection Division. 2021-06-01. https://consumer.georgia.gov/reverse-mortgages
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