You or heirs get the difference

Reverse Mortgage has Protection!

So even if the home's value were to fall, neither you nor your heirs would ever owe more than can be raised by selling the home. If the home ultimately sells for more than is owed, you or your heirs get the difference. (You can pay the debt off early, thus stopping interest charges from accumulating.)

The catch, as I said, is high costs compared to conventional mortgages.

Among those are a 2 percent loan origination fee and a 2 percent insurance payment to protect the lender in case the property ultimately fetches less than the borrower owes. There's also a 0.5 percent annual insurance fee. Up-front costs can generally be folded into the loan.

Currently, with the annual insurance fee included, interest runs from about 6.7 percent to 8.3 percent, compared to a little over 6 percent for a conventional loan. Also, most reversers are adjustable mortgages with interest rates changing every year, or even every month. So you could end up paying more.

Another drawback: You cannot borrow as much as your property is worth. That helps assure the lender that the property will sell for more than is owed.

Finally, the amount you can borrow depends on your age, with an older borrower getting more because there's less chance of debt growing larger than the property's value.

Source: Philadelphia Inquirer