Reverse Mortgages and Homeowner’s Insurance

Thinking of getting a reverse mortgage? It might be a good time to shop around to make sure you have adequate homeowner’s insurance, too. It’s good to compare different policies to find the best deal, especially if you’ve had the same coverage for many years.

When you tap into the equity in your house with a reverse mortgage loan, you won’t have to repay it until you leave you home. But if you don’t keep up with your homeowner’s insurance payments, you could be required to repay the loan early. That’s because your home will serve as collateral for a reverse mortgage loan. Mortgage lenders want to know that if they invest in your home by offering you a reverse mortgage it will be covered by insurance in case of a fire or accident.

Make sure the policy has replacement cost coverage. If your home were damaged or destroyed in a disaster, replacement coverage would pay for repairing or rebuilding it with similar materials.

In many cases, the amount of insurance you need will be less than the appraised value of your property. That’s because the appraised value includes the land, and only the structures on your property need to be insured with replacement cost coverage.

If your home is in a flood zone you also will be required to get a flood insurance policy when you get a reverse mortgage loan. Even if you own your home outright and don’t currently have a flood insurance policy you’ll be required to get on in a flood zone. The National Flood Insurance Program offers coverage for building property up to $250,000 and personal property up to $100,000.

This entry was posted on Friday, June 5th, 2009 at 8:53 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.