Hurricanes and Reverse Mortgages

Reverse mortgages are now more popular than ever, as seniors find themselves with more equity in their homes and less cash available to them in retirement than previous generations. With a reverse mortgage, seniors can take advantage of the equity in their home without having to pay until they move, die, or fail to maintain the property in good repair. So what happens to your reverse mortgage when your home is damaged in a hurricane?

key takeaways

  • If your home isn’t kept in good repair, your reverse mortgage expires.
  • There is no such thing as “hurricane insurance.”
  • Insurance policies in hurricane-prone coastal areas typically have limited coverage with higher deductibles for wind and water damage — the two main types of hurricane damage.
  • If you have a reverse mortgage and live near the coast, you should make sure you have adequate wind and water damage coverage in the event of a hurricane.
  • If you don’t have adequate insurance and can’t repair your home after a hurricane, you could lose your home to foreclosure.

What is a reverse mortgage?

Reverse mortgages are a way for retirees to access cash based on the equity in their home without having to make payments right away. A reverse mortgage expires if the borrower moves, dies, doesn’t keep up with property taxes and insurance, or doesn’t keep the property in good condition.

Insurance coverage and reverse mortgages

An important requirement of a reverse mortgage is that you must maintain homeowner’s insurance on the property, since the home is used as collateral for the loan. While hurricane damage is not entirely excluded, like earthquake or flood damage, in traditional policies, in hurricane-prone coastal areas there are typically low coverage limits and high deductibles for damage caused. by wind and water. What this means for you if you have a reverse mortgage is that you will need to increase your coverage limits and lower your deductibles, or make sure you have enough cash set aside to cover the gap for your home to be repaired after a hurricane.

$742.1 billion

The financial cost of hurricanes in the last five years (2016-2021). A figure that amounts to more than a third of the total cost of the last 42 years as hurricanes increase in severity and frequency as a result of climate change.

reverse mortgages with insurance

If you have adequate insurance with low deductibles and high coverage limits and your home is damaged in a hurricane, then your home will be repaired and your reverse mortgage will not expire.

Uninsured or inadequately insured reverse mortgages

Even before your home is hit by a hurricane, you could lose your home if you don’t have active homeowners insurance. You must keep up with your homeowners insurance premiums when you have a reverse mortgage. When your coverage expires, your reverse mortgage expires and you will receive a notice of default, giving you a deadline to remedy the problem and appeal rights. Be sure to appeal the decision right away and get homeowners insurance as soon as possible.

If you can’t pay your deductible, or the coverage limits aren’t high enough to cover needed repairs and you can’t make up the difference, you could be in trouble. If your house is not repaired, your reverse mortgage will expire. That’s why it’s so important to make sure you have adequate coverage long before a hurricane hits. If you find yourself in this dire situation, your local senior services organization can refer you to local organizations that may have grants to help seniors repair their homes.

You can also get help from the Federal Emergency Management Agency (FEMA) after a hurricane hits. When FEMA declares a disaster, it makes funds and personnel available to help survivors access temporary housing, emergency medical assistance, and grants that can help victims repair their homes.

Will my reverse mortgage expire if my home is damaged in a hurricane?

As long as your home is repaired after the hurricane damage, your reverse mortgage will not expire. If your home isn’t repaired after a natural disaster like a hurricane, your reverse mortgage will expire.

How will I pay for housing if my home is damaged in a hurricane?

The home payment after your home is damaged by a hurricane will depend on your insurance coverage. If you have loss of use coverage included in your policy, you may be able to get reimbursed for temporary housing expenses while you wait for your home to be repaired. If you don’t have coverage, FEMA or your local senior services organization can help you get and pay for housing after a hurricane.

Will FEMA help after my home is damaged by a hurricane?

Yes, you may be able to get help from FEMA after your home has been damaged by a hurricane, as long as a disaster has been declared.

The bottom line

Before a hurricane hits, make sure you have solid insurance coverage for wind and water damage, especially if you have a reverse mortgage. If you don’t, you will be required to repair your home. If you can’t afford it, you’ll have to rely on help from local organizations and FEMA, which may not be enough. Your reverse mortgage will expire and you could lose your home to foreclosure if your home is not repaired after a hurricane. Make sure you’re covered now so you don’t end up in an even worse situation after a disaster strikes.

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