Fine prints of reverse mortgages

Title: Understanding the Fine Print in Reverse Mortgages: What Matters and What Doesn't

This article delves into the often-overlooked aspects of reverse mortgages, focusing on the small print that can impact homeowners. The author categorizes these details into two groups: enforceable clauses and those that are likely unenforceable.

Enforceable Clauses:

1. Home Insurance: Providing proof of home insurance is a standard requirement before obtaining a reverse mortgage. Cancelling insurance post-loan may be challenging for the lender to monitor, but maintaining coverage is crucial to protect both the homeowner and the lender's collateral.

2. Principal Residence: Designating the property as a principal residence is essential for favorable rates and terms. Renting out a portion of the home is generally acceptable, but fully renting it out, especially through platforms like Airbnb, may pose issues.

3. Property Tax Payments: Keeping property taxes up to date is a non-negotiable aspect, regardless of the mortgage type. Failure to do so puts the home at risk, emphasizing the importance of regular property tax payments.

Likely Unenforceable Clauses:

1. Maintaining the Home: Although many contracts include clauses about maintaining the property, the author argues that these are practically impossible to enforce. Despite this, they recommend regular maintenance for the homeowner's benefit.

2. Other (Partial) Usages of the Home: The article highlights issues surrounding short-term rentals, such as Airbnb, which lenders may discourage. While practical enforcement challenges exist, seeking legal advice before engaging in such activities is advisable.

In conclusion, the key small print items to prioritize in a reverse mortgage are home insurance, property tax payments, and designating the property as a principal residence. The article suggests that clauses related to home maintenance and specific usages are likely included more for encouragement or discouragement and may not be legally or practically enforceable. Nonetheless, seeking legal advice before committing to a reverse mortgage is recommended.