One of the more interesting mortgage options to come along is the reverse mortgage. Incidentally, this is also an interesting retirement planning tool. The idea behind the reverse mortgage is that the lender pays you (lump sum, installments) a "mortgage payment" for the equity in your home.

This is really a home equity loan, and it will need to be paid back, but the terms of repayment are rather interesting. Basically, the home loan is paid back when you sell the house (or if you move out for an extended period of time). This means that you pay off the loan by selling your house. However, a reverse mortgage is usually set up so that if the lender gives you more than your home is worth, and selling the house doesn’t completely cover the reverse mortgage, that’s the lender’s loss.

The reverse mortgage is a good fit for retirees who have a lot of equity and want a steady income over a long period of time. However, the reverse mortgage is not for those planning to leave the house as part of the inheritance for their children.

The AARP offers this handy reverse mortgage calculator.

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