Who Pays Property Taxes on a Reverse Mortgage?

On a reverse mortgage, the homeowner pays the property taxes. A Home Equity Conversion Mortgage (HECM) wipes out your monthly principal and interest payments, but you keep the title to the house and every ownership cost that rides along with it: real estate taxes, homeowner’s insurance, any HOA or condo dues, and upkeep. Fall behind on the tax bill and the lender can declare the entire loan balance due and payable.¹

Why the Bill Still Comes to You

A reverse mortgage does not hand your home to the lender. The lender holds a lien; you hold the title.² Because you are still the owner, the HECM security instrument obligates you to pay all property charges on time and to give the lender proof of payment when asked.³

Here is the piece that surprises many new borrowers. A traditional mortgage usually escrows your taxes and insurance: a slice of every monthly payment goes into an account the servicer uses to pay those bills for you. A HECM has no monthly payment, so there is no escrow by default. Unless a set-aside or a voluntary arrangement is in place, tracking the due dates and writing the checks is entirely on you.

Your ongoing obligations as the owner include:

Property taxes assessed by your local taxing authority.
Hazard insurance, plus flood insurance where required, in amounts that protect the lender’s interest.
Condominium fees, HOA dues, and any planned unit development assessments.
Repairs needed to keep the home in reasonable condition.

What Happens if the Taxes Go Unpaid

Unpaid property taxes are one of the fastest paths to a HECM default. The federal rule is blunt: failure to pay property charges gives the lender the right to call the entire balance due.¹ The process moves in stages, and each stage is a chance to fix the problem.

Once the servicer learns a tax bill is delinquent, it has 30 days to send you a written notice. You then have 30 days to respond and explain what happened.⁴ That first window is your best shot at a quick resolution.

If the delinquency is not cured, the servicer will typically pay the tax bill itself to keep the municipality from placing a tax lien on the home. That advance, along with any penalties the servicer had to cover, gets added to your loan balance.⁵ If you still have HECM funds available, the servicer can draw on them. If a pattern develops, the servicer can start paying your property charges automatically from your remaining loan proceeds.

When no HECM funds are left and you cannot repay what the servicer advanced, the loan is declared due and payable. The servicer must tell HUD within 30 days, and foreclosure must begin within six months.⁶

Set-Asides That Pay the Taxes for You

Since 2015, every HECM applicant has had to go through a financial assessment before closing.⁷ If that review suggests you may not reliably keep up with taxes and insurance, the lender has to carve out a portion of your loan proceeds to cover those charges. This reserved money is called a Life Expectancy Set-Aside, or LESA.⁴

A fully funded LESA reserves enough to cover estimated taxes and insurance for the youngest borrower’s remaining life expectancy. The servicer pays those bills directly to the taxing authority and the insurance carrier before they come due; you never touch the money. Each disbursement is added to your loan balance when it is paid.⁴ The trade-off is less cash available to you at closing, but the risk of a tax-related default effectively disappears.

A partially funded LESA is used when a borrower meets some but not all of the residual income requirements. The LESA money is sent to you twice a year, and you make the actual payments to the taxing authority and the insurer. The servicer watches to confirm the payments were made, and if you miss one, it must notify you and FHA within 30 days.⁴

A LESA is an estimate, not a promise. If taxes climb faster than projected or you outlive the actuarial assumption, the set-aside can run dry while charges are still owed. When that happens, the servicer must notify you in writing within 30 days and point you to a HUD-approved housing counselor.⁴ From that point on, you are personally responsible for the bills again.

Even borrowers who pass the financial assessment cleanly can elect a set-aside voluntarily. There are three choices at closing:⁵

Self-pay, where you handle all property charges yourself.
A voluntary fully funded LESA, where the servicer pays the charges directly.
Servicer withholding on adjustable-rate HECMs, where the lender withholds funds from your monthly payments or line of credit to cover taxes and insurance.

Either voluntary option is one-way: once elected, it cannot be canceled. If you know your own bill-paying habits are uneven, or you just want the payments automated, the reduction in available funds is often worth it.

A Trap for Non-Borrowing Spouses

When only one spouse is on the HECM, FHA allows an eligible non-borrowing spouse to stay in the home after the borrower dies under a deferral of the due-and-payable trigger. The property tax obligation does not disappear during that deferral. It actually gets harder to meet.

To qualify, the non-borrowing spouse must have been married to the borrower at closing, must have been disclosed and named in the HECM documents, and must keep living in the home as a principal residence.⁸ The surviving spouse must also keep satisfying all of the borrower’s obligations under the loan, including property taxes and insurance, and must do so without receiving any HECM disbursements.⁹

That last sentence is the trap. A LESA that had been paying the borrower’s taxes stops disbursing once the deferral period begins. If any deferral condition stops being met, including payment of property charges, the deferral ends and the full balance becomes due, with no HUD approval required to call the loan.⁸ This is worth a long conversation with a housing counselor before closing.

If You Fall Behind, You Have Options

A missed tax payment does not always mean immediate foreclosure. HUD’s counseling guidelines direct counselors to work with the servicer on home-retention options, which include:¹⁰

A repayment plan for the corporate advances the servicer made to cover the delinquent taxes, spreading them out instead of collecting in a lump sum.
Refinancing the defaulted HECM into a new HECM if there is enough equity and you can pass a new financial assessment.
An at-risk extension for borrowers over 80 who face a critical health situation affecting themselves or a household member. Under rules effective April 29, 2024, the extension lasts as long as the borrower lives in the home, with no annual renewal.¹¹

None of these are automatic; each requires active contact with the servicer and, ideally, a HUD-approved counselor. Ignoring notices is the worst move. Foreclosure must begin within six months of the loan being called due, so the negotiating window closes.⁶

One structural protection is worth knowing. A HECM is a non-recourse loan. If the property is sold in foreclosure and the sale price does not cover the balance, the lender cannot pursue you or your estate for the difference.¹ That limits the damage to the loss of the home itself, but it does not stop the foreclosure from happening.

Senior Tax Relief, With One Warning

Before deciding you cannot carry your property taxes on a HECM, check what your state or county offers older homeowners. Many jurisdictions provide assessment freezes, homestead exemptions, or tax deferrals, usually tied to age, income, and primary-residence status. Cutting the annual bill by a few hundred dollars means a LESA lasts longer and more of your home equity stays available.

The warning: federal HECM rules prohibit borrowers from participating in real estate tax deferral programs or letting liens be recorded against the property that are not subordinate to the HECM.¹ A deferral program that puts a lien on your home to secure the postponed taxes can conflict with your reverse mortgage terms. Tax freezes and exemptions that simply lower the bill without creating a lien are generally fine. Your local assessor’s office or a HUD-approved housing counselor can tell you which programs in your area will and will not work with a HECM.

1
eCFR. 24 CFR 206.27 – Mortgage Provisions
2
Consumer Financial Protection Bureau. If I Take Out a Reverse Mortgage Loan, Does the Lender Own My Home?
3
U.S. Department of Housing and Urban Development. HECM Adjustable Rate Mortgage Model
4
eCFR. 24 CFR 206.205 – Property Charges
5
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
6
eCFR. 24 CFR 206.125 – Acquisition and Sale of the Property
7
U.S. Department of Housing and Urban Development. Mortgagee Letter 2014-21
8
U.S. Department of Housing and Urban Development. Mortgagee Letter 2014-07
9
U.S. Department of Housing and Urban Development. Mortgagee Letter 2015-15
10
U.S. Department of Housing and Urban Development. HUD Housing Counseling Guidelines for HECM Borrowers with Delinquent Property Charges
11
Administration for Community Living. New Protections for Older Homeowners with HECM Reverse Mortgages