Fires and Reverse Mortgages

Reverse mortgages are a common option for retired seniors who need money but still have a lot of equity in their homes. Many of them are unaware that if their property isn’t kept up properly, their reverse mortgage is due.

What Is a Reverse Mortgage?

A reverse mortgage is not the same as a conventional forward mortgage. For retirees who own their houses or have very little left on their mortgages, reverse mortgages are especially intended. They let the borrower to obtain a loan by using the equity in their house as security. Only in the event that the borrower vacates the property, passes away, or neglects to maintain adequate homeowner’s insurance coverage would the reverse mortgage become payable.

Insurance Coverage and Reverse Mortgages

In order to safeguard the lender’s investment, you must maintain homeowners insurance on your house while you have a reverse mortgage.

Reverse Mortgages with Insurance

Your home will be fixed and your reverse mortgage won’t become due if you have enough insurance on it and it is damaged in a wildfire. Make sure you have enough insurance to repair your house in the event of a fire by discussing your coverage limitations with your insurance agent.

Because building and material expenses are so high these days, insurance coverage is frequently insufficient to replace a home. In Boulder County, Colorado, more than 1,000 homes were destroyed in the December 2021 Marshall Fire, and many residents learned this lesson the hard way. If any of those victims have reverse mortgages and are unable to promptly get their homes restored due to inadequate coverage, they will likely encounter difficulties with their lender.

The Bottom Line

It is distressing to escape home fire damage. Especially if you have a reverse mortgage, be sure you have enough insurance coverage to fix your house in the worst case scenario. In order to make repairs and continue living in your house, you will need to rely on support from neighborhood organizations if your coverage is insufficient.

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