My Neighbor Took a Reverse Mortgage. Then the Property Tax Bill Came.
Frank is 72. He lives two doors down from me in a modest ranch house in Tampa that he's owned since 1987. Paid off the mortgage in 2012. Clear title. No debt. The kind of financial position most people dream of reaching before retirement.
Then his wife got sick. Not tragic-story sick β she's fine now β but expensive sick. Six weeks in the hospital. Specialist visits. Medications that Medicare didn't fully cover. By the time she was discharged, Frank had drained his savings and was staring at $40,000 in medical bills.
He didn't want to sell the house. It's his home. His memories. His backyard where the grandkids play. So he did what the commercials told him to do. He called the number on the TV. The one with the trusted celebrity and the promise of "tax-free cash from your home equity without monthly payments."
He got a reverse mortgage. A HECM β Home Equity Conversion Mortgage. He received $85,000 lump sum. Paid off the medical bills. Breathed again. The commercials didn't mention what came next.
The property tax bill arrived in November. $4,200. Frank had always paid it from savings. Now his savings were gone. He called the reverse mortgage servicer, confused. "I thought this eliminated my housing payments," he said. They explained β politely, firmly β that property taxes were still his responsibility. Always had been. It was in the loan documents. Page 14, paragraph 3.
He hadn't read page 14. He had been desperate and grateful and tired. And now he was facing a $4,200 bill with no savings and a reverse mortgage that had already claimed $12,000 in upfront fees and insurance premiums.
That's the part the commercials skip. The ongoing obligations. Property taxes. Homeowners insurance. Maintenance. The reverse mortgage doesn't eliminate these. It just eliminates the mortgage payment. And if you fail to pay taxes or insurance, the loan becomes due. The bank can foreclose. On a 72-year-old man who has lived in the same house for 39 years.
I met Frank at a community seminar in Tampa last month. I'm a housing counselor β or I was, before I started writing full-time. I still hold the HUD certification. And I still get angry when I see good people make bad decisions because the information was buried in fine print and sold with a smile.
We ran the numbers together. Frank's house is worth $320,000. The reverse mortgage balance, after six months of accrued interest and fees, was $97,000. He still had equity β about $223,000 β but the loan was growing at 6.2% annually. In ten years, if he stayed, the balance would be roughly $177,000. Still manageable, but eroding his legacy. His kids, who had assumed they'd inherit the house, were looking at a much smaller asset. Or no asset at all, if Frank lived long enough and the interest compounded aggressively.
And the property taxes? They weren't going down. Florida's housing market has been volatile. Tampa's property values have risen, which means assessments rise, which means tax bills rise. Frank's $4,200 bill would likely be $5,000 in a few years. And he had no plan to pay it.
We explored options. Selling was one β he could walk away with $220,000, buy a condo, and have cash left over. But he didn't want to leave. A HELOC was another, but at his age and income, qualification was uncertain. A traditional refinance would require monthly payments he couldn't afford. The reverse mortgage was already in place; the upfront costs were sunk.
What did Frank do? He got a part-time job. At 72. Bagging groceries at Publix. Twenty hours a week, $14 an hour, just to cover property taxes and insurance. He told me he didn't mind the work. "Keeps me moving," he said. But I saw the exhaustion in his eyes. The embarrassment. The feeling that he had been sold a solution that created a new problem.
Reverse mortgages are not scams. They're legitimate financial tools. For the right person β someone with significant equity, stable retirement income, no desire to leave the home to heirs, and a clear understanding of the ongoing costs β they can work. But they are complex. They are expensive. And they are permanent, or close to it. Once you take the lump sum, that money is gone. The interest accrues. The equity shrinks. And the obligations remain.
If you're considering a reverse mortgage, do what Frank didn't do. Read everything. Not just the summary. The full loan documents. The amortization schedule. The equity projection. Understand that "no monthly payments" does not mean "no ongoing costs." Understand that your heirs will inherit the loan, not the house, unless they can pay it off. Understand that property taxes and insurance are still your responsibility, and if you can't pay them, you can lose the home.
Get counseling. HUD requires it for HECMs. But don't stop there. Talk to a financial advisor. Talk to your kids. Talk to a housing counselor who doesn't make money from the loan. And run the numbers yourself. Use a calculator. Project the balance in 5, 10, 15 years. Look at what happens to your equity. Look at what happens if you live longer than you expect.
Frank is okay now. He's working. He's paying his taxes. He's staying in his house. But he's not retired. Not really. And every time he sees that commercial with the smiling celebrity, he changes the channel.
β Margaret, from a desk in Tampa where the property taxes are high and the fine print is higher
P.S. Frank's wife is doing much better. They're planting tomatoes in the backyard this spring. Some things are worth more than equity.
