Who pays property taxes and insurance on a reverse mortgage?

Reverse mortgages offer financial relief for homeowners aged 62 and up, but they don’t erase all responsibilities.  A common question is: Who pays property taxes and insurance?
The short answer: You, the homeowner—unless a Life Expectancy Set-Aside (LESA) steps in. Here’s what you need to know to stay on track.

Who pays property taxes and insurance on a reverse mortgage?

The Basics: Homeowner Responsibility

With a reverse mortgage, you still own your home and must pay property taxes and homeowner’s insurance.  The loan doesn’t cover these unless you qualify for a LESA due to income or credit constraints.  Failing to pay on time risks default and foreclosure—so it’s critical to plan ahead.



What’s a LESA—and Why It Might Help?

If your income or credit doesn’t meet HUD’s standards, a LESA sets aside loan proceeds to cover taxes and insurance.  While this reduces funds available for other uses, it’s not all bad:

  • How It Works: Funds are tapped only when payments are made—no interest accrues until then. Unused amounts aren’t borrowed, so they don’t add to your balance.
  • Benefits: Eliminates housing costs (except utilities and maintenance), ensures timely payments, and carries no extra fees.
  • Downside: Less cash for discretionary spending. If you need every dollar elsewhere, a LESA might not suit you.

Many borrowers request a LESA voluntarily after learning it simplifies finances.



Property Tax Responsibilities with a Reverse Mortgage

ScenarioWho Pays Taxes & Insurance?Key Details
Standard Reverse MortgageHomeownerYou pay directly; non-payment risks foreclosure.
With LESA (Required or Voluntary)Lender (via loan proceeds)Funds set aside; no interest until used; ensures payments are made on time.
Delinquent Taxes at ClosingPaid from loan proceedsAll back taxes must be cleared; LESA may be required if late payments occurred.

Property Tax FAQs

Q.

Do you have to pay property taxes on a reverse mortgage?

Borrowers always own their homes and are responsible for timely payment of taxes and insurance.  Failure to pay the taxes and insurance in a timely manner is a default under the terms of the loan and can lead to foreclosure.
Q.

Can I claim a property tax deduction if I have a reverse mortgage?

A reverse mortgage does not affect the taxes you claim for property taxes paid.  You will still be paying property taxes and treated the same as before you obtained your reverse mortgage.
Q.

Is there a reverse mortgage option that pays the property taxes and insurance?

You can voluntarily set up an account to pay your taxes and insurance for life using loan proceeds to pay the expenses.  You do not accrue interest on this portion of your loan until the lender actually sends the money in to pay for the expense, and if you sell or refinance the loan before these funds are used, the unused portion of the account funds was never borrowed, and so they are not included in the amount needed to repay your loan.  You must remember that once you set funds aside, you cannot change your mind later.
Q.

Can you get a reverse mortgage if you owe back property taxes?

All taxes must be brought current at the time of the loan, and if you have been late on property taxes, mortgage payments, or any other property charges in the past 24 months (i.e., HOA dues), the lender will require a Life Expectancy Set Aside per HUD guidelines to pay these expenses from your loan proceeds.
Q.

Can you do a reverse mortgage and then go into property tax deferral?

HUD requires that all property charges be paid when due.  They do not allow deferral programs.  If you qualify for an exemption, that is perfectly fine, but if it is a situation where amounts owed build up from non-payment, that violates the reverse mortgage agreement.
Curious About Your Options? Find out with a custom reverse mortgage quote from All Reverse Mortgage—America’s #1 with a 4.99/5-star rating! Call (800) 565-1722 or click here for your free quote —simple, trusted, 100% secure!