A Reverse Mortgage May Protect You if Disaster Strikes?
by Jeffrey L. Bangerter
September 01st, 2008
U.S. News & World Report has an interesting reverse mortgage article entitled "How the Housing Law Affects Reverse Mortgages".
It states that “even after taking out a reverse mortgage, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. If you don’t maintain homeowner’s insurance, for example, you risk the loan becoming due and payable. ‘If there is hurricane or flood damage to the home that you can’t repair, the loan is due,’ cautions Prescott Cole, an attorney and elder-care advocate who has worked with numerous reverse-mortgage borrowers. ‘If you can’t repay the loan, you will lose your house.’”
This information would have been better had it mentioned that an FHA-insured reverse mortgage is a non-recourse loan. A borrower is never liable for the debt beyond the value of the home. This is one reason you might consider taking all the money or most of it out in cash and putting it somewhere else instead of leaving it in the credit line of the reverse mortgage.
As to “losing” your home if it cannot be repaired because of a hurricane or flood, in effect with a reverse mortgage in such a situation you have sold it, as is. If you had taken all the money you just walk away and find a new place to live. You may well have done far better than neighbors with a forward mortgage where the loan amount is due and payable regardless of what happens to the property. For the full story, go to: How the Housing Law Affects Reverse Mortgages.