Do I Still Pay Property Taxes and Homeowners Insurance With a Reverse Mortgage?

According to CFPB, reverse mortgage borrowers must continue paying property taxes and homeowners insurance even though no monthly principal-and-interest payment is required.

Yes, You Must Still Pay Property Taxes

Property taxes remain your responsibility throughout the life of a reverse mortgage. Failure to pay property taxes is one of the primary reasons reverse mortgages go into default - and it can ultimately result in the loan becoming due.

For California homeowners, property taxes are based on Proposition 13 assessed values, which can be significantly lower than market value for long-term homeowners. This often makes the ongoing tax obligation more manageable than it might appear.

In my experience working with homeowners in Temecula, tax and insurance confusion is the biggest source of avoidable reverse mortgage stress after closing. A client I worked with in Mesa recently told me their confidence changed immediately once we mapped annual tax due dates and insurance renewal timing on one page. After 15 years of doing this in California and Arizona, I can tell you this simple calendar habit prevents most servicing surprises.

Yes, You Must Still Pay Homeowners Insurance

You must maintain homeowners insurance on the property at all times. The lender requires this to protect their interest in the home. If your insurance lapses, the lender may purchase force-placed insurance on your behalf and add the cost to your loan balance - which is more expensive and offers you less coverage.

You Must Also Maintain the Property

The loan requires you to keep the property in reasonable condition. Significant deferred maintenance or deterioration that reduces the home's value can technically constitute a default under the loan terms.

This does not mean the home must be perfect - but major issues like a failing roof, structural problems, or unaddressed water damage need to be addressed.

What Is a LESA?

If a lender's financial assessment raises concerns about your ability to keep up with property taxes and insurance going forward, they may require a Life Expectancy Set-Aside (LESA).

A LESA is a portion of your reverse mortgage proceeds held in a dedicated account to automatically pay property taxes and homeowners insurance on your behalf over the life of the loan. It functions as a built-in escrow account.

While a LESA reduces the funds available to you upfront, it provides a significant practical benefit: you never have to worry about forgetting a tax or insurance payment, and the risk of default from missed payments is essentially eliminated.

HOA Dues

If your home is in a homeowners association, you must also continue paying your HOA dues. Falling behind on HOA payments can create a lien on your property that complicates the reverse mortgage.

Planning for Ongoing Costs

Before getting a reverse mortgage, it is important to honestly assess your ability to cover these ongoing obligations:

� Annual property tax amount (check your current bill)

� Annual homeowners insurance premium

� HOA dues if applicable

� Estimated annual home maintenance budget

If these costs feel uncertain, a LESA or a reverse mortgage line of credit reserved for this purpose can provide a reliable safety net.

HUD HECM servicing rules consistently treat unpaid property charges as a primary default trigger, which is why obligation planning should be treated as core loan strategy.

Frequently Asked Questions

What happens if I miss a property tax payment?

The lender will first issue a default notice and may advance the tax payment on your behalf, adding it to your loan balance. If the default is not cured, the loan can ultimately become due and payable. It is important to address any property tax issues immediately.

Can I use reverse mortgage funds to pay taxes and insurance?

Yes. Many homeowners use a reverse mortgage line of credit specifically to cover these ongoing obligations, especially in years when other income is limited.

Does a reverse mortgage escrow taxes and insurance automatically?

Not unless a LESA is established. In most cases, you manage these payments yourself - just as you would with a paid-off home.

This material is not from HUD or FHA and has not been approved by HUD or any government agency. All reverse mortgage loans are subject to credit and property approval. Terms and conditions may apply. This content is for educational purposes only and is not financial, tax, or legal advice.