Neglecting the Home

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You may recall that there are three ways for a loan to become due in full: You move out, die, or fail to maintain your property. If you neglect your home and let it go to "seed," the lender can end the loan and demand repayment. Of course, it's rare that the lender will come by and inspect your home, but there are a couple of red flags that go up if you're exhibiting certain behavior:

1 You stop paying your property taxes. You're required to continue all of your regular city or state property taxes while receiving your reverse mortgage funds. An easy way to make sure this happens (forgetfulness is a common trait among reverse mortgage borrowers) is to let the lenders take care of this for you. You have the option to have your property taxes taken straight out of your loan and paid by the lender; use this feature if you think paying property taxes may slip your mind.

1 You stop paying your homeowner's insurance. It's crucial that you keep up with your regular insurance payments. Not only does this protect you if anything should happen to your home or your possessions, but it also protects the lender's investment (so you can see why they'd be sticklers about this). Along with your property tax, you can elect to let the lender take over your homeowner's insurance payments. It's a good way to make sure you never fall behind.

^ You never follow up on your repair rider. When your home is appraised, the appraiser may find that some areas of your house need to be addressed before they can recommend you as a good candidate for a reverse mortgage. It may be something relatively small like a malfunctioning water heater, or a big project like replacing the roof over your kitchen. That appraisal report goes off to the lender, who notes in a repair rider that in order to receive your loan, you need to fix this problem. If you choose to use some of your reverse mortgage money for that purpose, you have up to one year to have it completed by a licensed contractor. Your lender even sets aside an estimated amount for you to dip into. If you don't get the problem fixed to the appraiser's satisfaction, you may be looking at a loan that's due right away. Remember, always complete those repair riders before you spend your money on anything else.

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