How the Housing Law Affects Reverse Mortgages

Most seniors should be cautious.

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Keep up the house. 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."

Don't move. If you sell your home or no longer use it as your primary residence for 12 months in a row, you or your estate will have to repay the cash you received from the reverse mortgage, including interest and other fees to the lender. "Unless a senior intends to die in their home, they want to be very careful about getting involved with one of these products because it is a never-ending pit of debt," says Cole. "If you go into a nursing home for longer than 12 months, the loan is due." Any equity remaining in your home after the loan is completely repaid belongs to the homeowner or an heir. But if you're considering moving or have a health problem that will require you to leave your home indefinitely, reverse mortgages aren't worth the fees. Says Stucki: "If you can't stay home for quite a few years, then it's a bad deal."