Water, water everywhere and nary a drop to drink.

For decades, retirees looking to convert their biggest asset -- home, sweet home -- into income were forced to choose between either selling their house or taking out a home equity loan, which sentenced them to an unwelcome schedule of high-interest monthly payments.

It's no wonder reverse mortgages have become the cash-strapped homeowner's financial planning tool of choice.

Reverse mortgage basics

• How does it work? The bank makes payments to the borrower based on a percentage of accumulated home equity. • When does it need to be repaid? When the borrower dies, sells the home or permanently moves out. • Who is eligible? Seniors age 62 and older who own homes outright or have small mortgages. • How can money be used? For any reason. Retirees typically use cash to supplement income, pay for health care expenses, pay off debt or finance home improvement jobs.

Introduced in 1989, such loans enable seniors age 62 and older to access a portion of their home equity without having to move.

The bank makes payments to the borrower throughout his or her lifetime based on a percentage of accumulated home equity. The loan balance does not have to be repaid until the borrower dies, sells the home or permanently moves out.

Better yet, you can never owe more than the value of your home in a reverse mortgage loan, regardless of how much you borrow. And if the balance is less than the value of your home at the time of repayment, you or your heirs keep the difference.

How much can you get?
According to the National Reverse Mortgage Lenders Association (NRMLA), several factors determine the amount of funds you are eligible to receive through a reverse mortgage. They include:

Factors that influence loan amount

• Age (or the age of the youngest spouse in the case of couples). • Value of home. • Interest rate. • Lending limit in your area (in some cases).

To be eligible, you must either own your home outright or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan.

You must also use the home as your primary residence.

Generally, the older you are and the more valuable your home, the more money you can get.