HECM Borrower Obligations Guide for Homeowners

A reverse mortgage can remove the required monthly principal and interest payment from your budget, but it does not remove the costs and responsibilities of homeownership. This HECM borrower obligations guide explains the commitments that continue after closing, so you can make a decision with clarity and protect your ability to remain in your home.

For many older homeowners, a Home Equity Conversion Mortgage, or HECM, is a way to use part of their home equity while aging in place. That can be a meaningful source of flexibility in retirement. At the same time, the loan is secured by your home. Meeting the ongoing requirements is what keeps the loan in good standing.

The responsibilities that stay with you

With a HECM, you continue to own your home and keep title to it. You are still responsible for paying property charges, maintaining the property, and living in the home as your principal residence. These duties apply whether you receive your reverse mortgage funds as a lump sum, line of credit, monthly payment, or a combination of options.

Your loan balance may grow over time because interest and mortgage insurance premiums accrue on the amount borrowed. The loan generally does not require monthly principal and interest payments while you meet the loan requirements. However, taxes, insurance, association dues, and upkeep are separate costs. Planning for them is essential.

HECM borrower obligations: the four core duties

1. Live in the home as your principal residence

A HECM is intended for the home where you primarily live. You must continue to occupy the property as your principal residence and certify this to your loan servicer when requested. Servicers commonly send an annual occupancy certification, and responding promptly helps avoid unnecessary concern about the status of your loan.

Temporary absences are permitted in many situations. For example, a vacation, extended visit with family, or short rehabilitation stay does not automatically make the loan due. A longer absence can create concerns, particularly if the home is no longer your principal residence. If you expect to be away for an extended period because of medical care or another significant life event, contact your servicer early. Do not wait for a notice to arrive.

The rules can be especially important when a borrower moves into a nursing facility or other health care setting. A HECM may become due and payable when the last surviving borrower has lived away from the home for more than 12 consecutive months because of physical or mental illness. Individual circumstances matter, so ask questions as soon as a change in living arrangements appears likely.

2. Pay property taxes on time

Property taxes remain the homeowner’s responsibility. Missing tax payments can place a lien on the home and put the HECM at risk. Even if you have never had difficulty paying taxes before, rising assessments or the loss of a local tax exemption can change your budget in retirement.

Review your tax bill each year and know its due dates. Some areas permit payments in installments, while others offer tax relief programs for qualified older adults, veterans, or homeowners with limited incomes. Those programs vary by state and locality, so it is worth checking what may be available where you live.

If your taxes are paid through a Life Expectancy Set-Aside, often called a LESA, the lender uses funds set aside at closing to make those payments. A LESA can reduce the risk of missed property charges, but it does not mean you should ignore tax notices. Keep the notices, review them for accuracy, and confirm how the arrangement works with your servicer.

3. Keep homeowners insurance in force

You must maintain adequate homeowners insurance for the life of the loan. Insurance protects you, your home, and the collateral securing the loan if there is a fire, storm, or other covered loss. Letting a policy lapse, even accidentally, can lead to a default under the loan agreement.

Watch for renewal notices and premium increases. If an insurer will not renew your policy or the cost becomes difficult to manage, begin looking for options before the coverage ends. A higher deductible may lower premiums, but it also means more out-of-pocket expense after a claim. The right choice depends on your savings, the condition of your property, and the risks common in your area.

If your home is in a federally designated flood zone, flood insurance may also be required. This is not a cost to overlook when deciding whether a reverse mortgage fits your long-term budget.

4. Maintain the home and pay required association charges

The home must be kept in reasonable condition. Normal aging is expected, but major issues that threaten the property’s safety, value, or marketability may need attention. A failing roof, significant water damage, unsafe electrical conditions, or a severely deteriorated exterior can become more than a household repair problem.

Maintenance is easier to manage when it is planned rather than postponed. Set aside funds for routine work such as gutter cleaning, heating and cooling service, plumbing repairs, and exterior upkeep. If a large repair is needed, speak with trusted contractors and consider how the expense fits into your overall retirement plan before making a rushed decision.

If you live in a condominium, planned community, or neighborhood with a homeowners association, you must also pay applicable dues, assessments, and charges. An unpaid association balance can create a lien. Read association mail carefully, especially notices about special assessments or insurance changes, since these expenses can be substantial.

What happens if an obligation is missed?

A missed tax payment, lapsed insurance policy, unpaid association charge, or unresolved occupancy issue can place the loan in default. That does not necessarily mean immediate foreclosure. Typically, the servicer sends notices and may provide an opportunity to correct the problem. Still, the situation is serious and should be addressed right away.

Do not assume a notice is a mistake or that a family member will be able to handle it later. Open all mail from your servicer, tax authority, insurer, and association. Keep copies of payments, declarations pages, and correspondence in one accessible place. If you are confused by a letter, call the servicer and ask what is needed, when it is due, and how to document that you have resolved the issue.

A HECM also becomes due and payable when the last borrower dies, sells the home, or permanently moves out. At that point, heirs generally have options to sell the property, repay the loan balance, or purchase the home for the applicable amount permitted under HECM rules. Because the loan is nonrecourse, neither borrowers nor heirs owe more than the home’s value at the time the loan is repaid, provided loan requirements have been met.

Build these costs into your retirement plan

The best time to prepare for HECM obligations is before closing. Estimate your yearly property taxes, homeowners and flood insurance, association dues, utilities, and routine maintenance. Then consider whether those costs may increase over the next five to 10 years.

It can help to create a separate home expense reserve. Even a modest amount set aside each month can make annual tax bills and insurance renewals less stressful. If you use HECM proceeds to improve cash flow, be careful not to treat the available funds as an unlimited resource. A line of credit may offer flexibility, but withdrawals increase the loan balance and reduce the equity that may remain later.

Include a trusted family member or other support person in your planning if you wish. They do not need to make decisions for you, but they can know where you keep important documents and help you respond if illness, travel, or an emergency makes paperwork difficult.

Get impartial answers before you commit

Required HECM counseling is designed to help you understand both the benefits and the responsibilities of this loan. A counselor can explain how the loan works, discuss alternatives, review your budget, and help you prepare questions for a lender. Reverse Mortgage Helper provides nonprofit, impartial counseling so homeowners can make choices based on their own needs and goals.

A reverse mortgage should support your independence, not add uncertainty. Before moving forward, make sure your plan includes more than access to home equity. It should also include a realistic, comfortable way to keep the home protected, maintained, insured, and truly yours for the years ahead.