Hurricanes and Reverse Mortgages

Reverse mortgages are now more popular than ever before, as seniors find themselves sitting on more equity in their homes and less cash available to them in retirement than previous generations. With a reverse mortgage, seniors are able to tap into their home’s equity without having to pay until they move, pass away, or fail to keep the property in good repair.

So what happens to their reverse mortgage when their home is damaged in a hurricane?

Key Takeaways

  • If your home is not kept in good repair, your reverse mortgage becomes due.
  • There is no such thing as hurricane insurance.
  • Insurance policies in coastal areas prone to hurricanes typically have limited coverage with higher deductibles for wind and water damage, the two main types of hurricane damage.
  • If you have a reverse mortgage and live near the coast, you should make sure that you have adequate wind and water damage coverage in case of a hurricane. 
  • If you don’t have adequate insurance and can’t repair your home after a hurricane, you may lose your home to foreclosure.

What Is a Reverse Mortgage?

Reverse mortgages are a way for retirees to access cash based on the equity that they hold in their home without having to make payments right away. A reverse mortgage becomes due if the borrower moves, dies, fails to remain current on property taxes and insurance, or fails to keep the property in good condition.

Insurance Coverage and Reverse Mortgages

A major requirement of a reverse mortgage is that you must maintain homeowners insurance on the property, as the home is used as collateral for the loan. Hurricane damage isn’t excluded outright like earthquake or flood damage in traditional policies, but in coastal areas prone to hurricanes, there are typically low coverage limits and high deductibles on wind and water damage. What this means for you if you have a reverse mortgage is that you’ll either need to raise your coverage limits and lower your deductibles or make sure that you have enough cash set aside to cover the gap so that your home is repaired after a hurricane.

$742.1 billion

The financial cost of hurricanes in the last five years (2017–2021). This figure amounts to more than one-third of the total cost of the last 42 years, as hurricanes increase in severity and frequency as a result of climate change.

Reverse Mortgages with Insurance

If you have adequate insurance with low deductibles and high coverage limits and your home is damaged in a hurricane, then your home will be repaired and your reverse mortgage will not become due.

Reverse Mortgages with No or Inadequate Insurance

Before your home is even hit by a hurricane, you could lose your home if you don’t have active homeowners insurance. You must remain current on your property insurance premiums when you have a reverse mortgage. When your coverage lapses, your reverse mortgage becomes due and you’ll receive a notice of default, which will give you a deadline for remedying the issue and appeal rights. Make sure that you appeal the decision right away and get homeowners insurance as soon as possible.

If you can’t afford to pay your deductible, or if the coverage limits aren’t high enough to cover needed repairs and you can’t cover the difference, then you could be in trouble. If your home isn’t repaired, then your reverse mortgage will become due. This is why it’s vital to make sure that you have adequate coverage long before a hurricane hits. If you find yourself in this awful situation, your local aging services organization can refer you to local organizations that may have grants in place to help seniors repair their homes.

You also may be able to get help from the Federal Emergency Management Agency (FEMA) after a hurricane hits. When FEMA declares a disaster, it makes funds and staff available to help survivors access temporary housing, emergency medical assistance, and grants that can help victims repair their homes.

Will my reverse mortgage become due if my house is damaged in a hurricane?

As long as your home is repaired after hurricane damage, your reverse mortgage will not become due. If your home is not repaired after a natural disaster like a hurricane, then your reverse mortgage will become due.

How will I pay for housing if my home is damaged in a hurricane?

Paying for housing after your home is damaged in a hurricane will depend on your insurance coverage. If you have loss-of-use coverage included in your policy, you can get reimbursed for temporary housing expenses while you wait for your home to be repaired. If you don’t have coverage, the Federal Emergency Management Agency (FEMA) or your local aging services organization may be able to help you secure and pay for housing after a hurricane.

Will FEMA help after my home is damaged in a hurricane?

Yes, you may be able to get help from FEMA after your home has been damaged in a hurricane, as long as a disaster has been declared.

The Bottom Line

Before a hurricane ever hits, make sure that you have robust insurance coverage for wind and water damage, especially if you have a reverse mortgage. If you don’t, you’ll be on the hook for repairing your home. If you can’t afford to, you’ll have to depend on help from local organizations and FEMA, which may not be enough. Your reverse mortgage will become due, and you could lose your home to foreclosure if your home isn’t repaired after a hurricane. Make sure you’re covered now, so you don’t end up in an even worse situation after disaster strikes.

Article Sources

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  1. U.S. Department of Housing and Urban Development. “Home Equity Conversion Mortgages for Seniors.”

  2. Consumer Financial Protection Bureau. “When Do I Have to Pay Back a Reverse Mortgage Loan?

  3. Insurance Information Institute. “Background On: Hurricane and Windstorm Deductibles.”

  4. Consumer Financial Protection Bureau. “What Are My Responsibilities as a Reverse Mortgage Loan Borrower?

  5. National Oceanic and Atmospheric Administration, Office for Coastal Management. “Hurricane Costs.”

  6. Consumer Financial Protection Bureau. “What Should I Do If I Have a Reverse Mortgage Loan and I Received a Notice of Default or Foreclosure?

  7. Consumer Financial Protection Bureau. “Your Reverse Mortgage After a Natural Disaster.”

  8. U.S. Department of Health and Human Services, Administration for Community Living. “Older Americans Act.”

  9. Federal Emergency Management Agency. “Assistance for Housing and Other Needs.”