The lesson here is get your business in order so you dont have to do stuff like this.

There is debt created, and it gets bigger every month. We may be talking past each other, a loan and debt are the same in my definition. Every month they send you an equity check, your debt/loan goes up by that amount + interest. And really with each month, your financial position (house equity and loan) gets riskier and riskier because your debt gets bigger and equity (function market price of house which can go up or down) goes down assuming house market value stays constant.

From IRS FAQ'S

Question
Are the proceeds I receive from a reverse mortgage taxable to me?
Answer
No, reverse mortgage payments aren't taxable. Reverse mortgage payments are considered loan proceeds and not income. The lender pays you, the borrower, loan proceeds (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home.

With a reverse mortgage, you retain title to your home.
Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die.
Interest (including original issue discount) accrued on a reverse mortgage isn't deductible until you actually pay it (usually when you pay off the loan in full). Also, a deduction of interest may be limited because a reverse mortgage generally is subject to the limit on home equity debt, which is not deductible unless the proceeds are used to buy, build, or substantially improve the home that secures the loan. For information on deducting mortgage interest and the debt limit that applies, see Publication 936, Home Mortgage Interest Deduction.

gotta be different types of deals
this is a 2 time pay out
lump sum
there are no payments
at the time of death
we would have the option to pay the purchase price back at 4%
or sell the home within a year & pay back the purchase price & keep any amount over
or hand them the keys & 0 $'s

I had a friend do one(even though I was telling him not to) by the time he paid for a new appraisal, a new survey, for a tax check, for a home inspection and he had to fix any problems they found. In his case a new roof and some other minor repairs he only got 1/3 of what he was told that he would receive. You still pay taxes, insurance and upkeep on the house. Don't do it.

"You still pay taxes, insurance and upkeep on the house."

don't you do that for any home you live in?

i feel bad for your friend
its not perfect for everybody
the 3 people we have talked to
never mentioned appraisals or any of the other stuff
it seemed like they refer to TAD
they would leave the house as is as far as repairs
1 of the guys is like a 3rd generation millionaire (mortgage industry)
his Dad did it the day after his home was paid off
it is a no brainer in my Moms case
& nothing but positive can come out of it