Hurricanes and Reverse Mortgages

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

Key points to remember

  • If your home is not maintained in good condition, your reverse mortgage becomes due.
  • There is no “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 need to 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 risk losing your home to foreclosure.

What is a Reverse Mortgage?

Reverse mortgages are a way for retirees to access cash based on the equity they hold in their home without having to make payments immediately. A reverse mortgage becomes due if the borrower moves, dies, fails to meet property taxes and insurance, or fails to maintain the property in good condition.

Insurance coverage and reverse mortgages

A major requirement of a reverse mortgage is that you must maintain home insurance on the property as the house is used as collateral for the loan. Although damage caused by hurricanes is not completely excluded, such as damage caused by earthquakes or floods in traditional policies, in coastal hurricane-prone areas, coverage limits are generally low and deductibles high. for wind and water damage. What this means for you if you have a reverse mortgage is that you will either need to increase your coverage limits and reduce your deductibles, or make sure you have enough money aside to cover the gap so that your house is repaired after a hurricane.

$742.1 billion

The financial cost of hurricanes over the past five years (2016-2021). A figure that represents more than a third of the total cost of the past 42 years as hurricanes increase in severity and frequency due to 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, your home will be repaired and your reverse mortgage will not become due.

Reverse mortgages without insurance or with inadequate insurance

Even before your home is hit by a hurricane, you could lose your home if you don’t have active home insurance. You need to stay current on your home insurance premiums when you have a reverse mortgage. When your coverage expires, your reverse mortgage becomes due and you will receive a Notice of Default, which will give you a time to remedy the problem and appeal rights. Be sure to appeal the decision immediately and get home insurance as soon as possible.

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

You may also be able to 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 become due if my home is damaged in a hurricane?

As long as your home is repaired after the hurricane damage, your reverse mortgage will not become due. If your home is not repaired after a natural disaster like a hurricane, your reverse mortgage will become due.

How will I pay for housing if my house is damaged by a hurricane?

Paying for housing 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 can be reimbursed for temporary housing costs while you wait for your home to be repaired. If you don’t have coverage, FEMA or your local senior services organization may be able to help you find and pay for housing after a hurricane.

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

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

The essential

Before a hurricane hits, make sure you have strong insurance coverage for wind and water damage, especially if you have a reverse mortgage. If you don’t, you will be forced to repair your house. If you can’t afford it, you’ll have to depend on help from local organizations and FEMA, which may not be enough. Your reverse mortgage will become due 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 worse off after a disaster.

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