Reverse mortgages are helpful retirement tools because they offer supplemental income that doesn’t have to be repaid until (potentially) much later. However, it’s important to understand your property tax and homeowner insurance obligations, so you won’t
have any surprises. Here’s a rundown of what to expect.
Depending on how your reverse mortgage was set up at the time of origination, there may have been funds set aside in an account to pay for your taxes and insurance. If you have a set aside account, this is referred to as a life expectancy set aside account or “LESA”. Funds from your LESA account are used to pay your tax and insurance obligations. You can review the mortgage documents signed at closing to determine your status, and you can check your current balance on your monthly account statement. Once the LESA funds are depleted, you are responsible for the future tax and insurance payments.
If your mortgage was set up on a fully funded or voluntary LESA at closing, PHH will issue the payment for the taxes and insurance on your behalf from the funds set aside in your LESA account. If your mortgage was originated with a partially funded LESA, then those funds are disbursed twice a year to you so that you can use that money to pay towards your property taxes and insurance. If you do not have a LESA account, in most cases, you are responsible for paying your taxes and insurance. It is important that taxes and insurance are paid on time. For insurance coverage, if you change insurance companies, please check our FAQs to update what is called the “Mortgagee Clause” to ensure your insurance carrier provides us updates on your insurance status and payments.
Check out our FAQs for more helpful information on taxes and insurance.