By Tyler Plack
Tyler Plack is the President of South River Mortgage. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification and is the author of The Retirement Solution: Maximizing Your BenefitTyler is a seasoned entrepreneur and real estate investor renowned for his expertise in reverse mortgages and his commitment to addressing seniors' equity challenges. Tyler brings a unique perspective to his ventures, having built several successful companies throughout his career. His insights are frequently sought by industry publications, where he is recognized for his vast knowledge in the realm of reverse mortgages.
An avid investor in income-producing properties, Tyler is dedicated to helping seniors navigate their financial needs with compassion and expertise. When Tyler is not helping solve America's retirement crisis, he is a skilled pilot flying airplanes for fun.
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If you’re thinking about getting a reverse mortgage, you probably have a lot of questions about how it will change your financial picture. One of the most common: What happens to my property taxes?
The short answer is that a reverse mortgage does not eliminate or reduce your property taxes—but it can give you more flexibility to pay them. Let’s walk through exactly what changes, what stays the same, and how to plan ahead.
You Still Own Your Home
When you take out a reverse mortgage, the title to your home stays in your name. That means you keep all the responsibilities of homeownership, including paying your property taxes and homeowners insurance, and keeping your home in good repair.
Unlike selling your house or moving into a rental, a reverse mortgage doesn’t shift these costs to anyone else.
The Property Tax Requirement
Every reverse mortgage—whether it’s a federally insured HECM or a proprietary jumbo—has a built-in requirement that you keep your property taxes current.
If you fall behind, the lender has the right to call the loan due and payable. That’s why most reverse mortgage lenders will check your tax payment history as part of the application process.
State and Local Property Tax Rules
Property tax rules vary widely by state and even by county. Some states offer senior tax exemptions, “circuit breaker” credits, or tax deferral programs that let you postpone payments until the home is sold.
If you’re considering a reverse mortgage, it’s a good idea to check your local assessor’s website or talk to your loan officer about available programs. These local benefits can work alongside a reverse mortgage to reduce your out-of-pocket costs.
The Role of a LESA (Life Expectancy Set-Aside)
If your credit history shows you’ve had trouble paying taxes or insurance in the past, you might be required to set aside part of your reverse mortgage proceeds into a dedicated account—called a Life Expectancy Set-Aside.
The LESA is there to cover your property taxes and insurance automatically each year, so you don’t have to worry about budgeting for them. This can be a relief for some borrowers, but it does mean you’ll have less cash available upfront.
What Happens If You Fall Behind
Falling behind on property taxes is one of the most serious risks with a reverse mortgage. If taxes aren’t paid, the lender can step in to protect its interest in the home by paying the taxes themselves — and then call the loan due and payable.
Typically, you’ll receive notices and have time to cure the delinquency, but repeated nonpayment can lead to foreclosure. That’s why lenders review your tax history carefully and why many borrowers appreciate the LESA option as built-in protection.
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How a Reverse Mortgage Can Help with Property Taxes
While it won’t reduce the tax bill itself, a reverse mortgage can make paying it easier:
- You can use reverse mortgage proceeds to cover your property taxes each year without touching other income sources
- If your taxes are high because of your home’s value, a reverse mortgage can turn that equity into cash flow to offset the expense
- A line of credit option can act as a backup fund for future tax bills, giving you more peace of mind
Example Scenario: Using a LESA to Cover Taxes
Let’s say your annual property taxes are $6,000 and you’re 72 years old. Based on your age and the loan structure, your lender might set aside enough funds to cover those taxes (and insurance) for your estimated life expectancy.
If your reverse mortgage qualifies you for $180,000 in proceeds, roughly $60,000 might be reserved in a LESA to pay taxes and insurance automatically. That would leave you with $120,000 in available funds. The benefit? Your property taxes are handled every year without you having to budget or worry about missing payments.
The Bottom Line
A reverse mortgage won’t take away your property tax bill, but it can make it much easier to manage—especially if you’re on a fixed income. By unlocking your home equity, you can create a reliable source of funds to handle this ongoing expense without sacrificing your lifestyle.
At South River Mortgage, we’ve helped retirees use reverse mortgages to turn their home equity into a financial safety net, while keeping up with property tax requirements and protecting their home for the long term.
Want to see how much equity you could access—and how it could help you cover your property taxes?
FAQs
Do you still pay property taxes with a reverse mortgage?
Yes. You remain responsible for all property taxes, insurance, and basic upkeep.
Can a reverse mortgage reduce my property tax bill?
No. It doesn’t change your tax rate or bill, but it can give you the funds to pay it more easily.
What happens if I don’t pay my property taxes?
The lender can pay them on your behalf to protect its interest and then call the loan due. Eventually, nonpayment can lead to foreclosure.
Can I use a reverse mortgage line of credit to pay taxes?
Yes. Many homeowners keep a line of credit open as a flexible way to cover annual tax bills without touching other income.
Are there property tax relief programs for seniors?
Many states offer exemptions, freezes, or deferrals. These programs are separate from your reverse mortgage and can be combined for extra relief. Check your local assessor’s office for details.
