A reverse mortgage eliminates the monthly principal and interest payment. It does not eliminate property taxes, hazard insurance, HOA dues, or maintenance — and failing on any of those is the leading cause of reverse mortgage default.
The obligation in plain terms
Your loan documents require you to keep the home as your principal residence, keep property taxes current, maintain adequate hazard insurance, and keep the property in reasonable repair. Fall behind and the servicer will attempt to cure it; unresolved, the loan can be called due.
California specifics that help
- Proposition 13 caps assessed value increases, so long-time owners often have property tax bills far below market-rate assessments. This is a real advantage for reverse mortgage affordability.
- Property Tax Postponement is available through the State Controller for qualifying seniors, though it interacts with an existing reverse mortgage and must be discussed with your servicer first.
- Disabled veteran and homeowner exemptions reduce the base bill.
Proposition 19 and your heirs
Prop 19 narrowed the parent-to-child assessed value transfer. In most cases a child now keeps the low assessed basis only if they make the home their principal residence, and even then there is a value limit above which the assessment is partially adjusted. Inherited rental or second-home use generally triggers reassessment at market value.
This matters for reverse mortgage planning: if your heirs intend to keep the home, a reassessed tax bill plus the loan payoff is a combined burden. Talk it through as a family before closing, and read our guide on heir options and the 95% rule.
Insurance is the new pressure point
California hazard insurance has become the harder problem. Non-renewals in wildfire-exposed areas across the Sierra foothills, Central Valley edges, and Southern California mean some borrowers land on the FAIR Plan at multiples of their prior premium. Your loan requires continuous coverage — a lapse is a default trigger. Budget for premium increases, not just the current bill.
How a LESA protects you
If the financial assessment suggests risk, the lender sets aside part of your principal limit to pay taxes and insurance for the projected life of the loan. It reduces available cash but removes the default risk entirely. Details in our LESA guide.
Practical steps
- Get a current insurance quote before you apply, not after
- Confirm your county tax due dates and set reminders
- Ask whether a voluntary LESA makes sense even if not required
- Keep proof of payment — servicers verify annually
Run your numbers including these carrying costs in the calculator, or talk with us about a set-aside structure.
