What types of insurance do I need for a reverse mortgage? Do I need to have mortgage insurance on a reverse mortgage? Can I forgo insurance altogether?
When you have a reverse mortgage on your home you will be required to carry home owners insurance on that property at all times. The insurance must cover any damages to the property and include fire insurance. Depending on the state that you live in, you may be required to carry flood or storm insurance in addition to your original policy if these items are not covered. Verify with your lender the exact type of insurance you need to have on your property when you sign your contract.
Do I need to have mortgage insurance on my reverse mortgage?
Borrowers are not required to carry mortgage insurance on their reverse mortgages. However, people that do carry mortgage insurance on these loans can guarantee that their heirs will not owe the lender any money down the road. Currently, reverse mortgage insurance is only offered trough the FHA. Borrowers will need to get a FHA/HUD reverse mortgage to qualify for this insurance program. You do not need to carry this type of insurance to qualify for, or receive, a reverse mortgage from a private lender.
Can I forgo insurance altogether when I have a reverse mortgage?
Lenders require that the property being borrowed against is kept fully insured. At any time during your reverse mortgage contract the insurance policy lapses or goes inactive the borrowers is in violation of the contract. At that time, lenders can either withhold any further payments until structure is fully insured again or recall the loan. If the loan is recalled a forced sale may have to take place to cover the debt owed to the lender. It is always wise to keep your home fully insured during the contract.
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