It’s not easy to default on your reverse mortgage. You simply have to keep up your property. Pay the taxes. Pay the homeowners insurance. But if you can’t do these simple things, your reverse mortgage goes into default.
Reverse mortgages, which allow older adults to convert some of the equity in their homes into cash, have been a life line for many house-rich, cash-poor seniors struggling to get by.
But now, with a growing number of reverse mortgages falling into default, these retirees could end up losing their homes.
As the name implies, reverse mortgages work the opposite of traditional mortgages. Instead of the homeowner making monthly payments to the lender, the lender pays the homeowner, in a lump sum or a set amount each month.
Available to people age 62 and older, none of the money — which might be used for medical bills, home repairs or day-to-day living expenses — has to be repaid as long as the borrower remains in the home.
Still, the loan can end up in default if the borrower doesn’t pay property taxes and homeowners insurance.