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If you’re a full-time or part-time worker, you’ve probably already started thinking about retirement. You’ve likely heard of the importance of opening a retirement savings account, but did you know that the equity in your home can also be a great way to plan ahead? There are several ways you can leverage your property for retirement to help you get the most out of your golden years.

Understanding Home Equity

Simply put, home equity is the difference between what’s owed on your mortgage and the current value of your property – and if you’ve already paid off your mortgage then your home equity is the current market value. The value of your home will also depend on any home renovations that have been done, the location of the property, and the size of the home.

You can increase your home equity by investing in your home’s value with upgrades, cleaning, and energy-efficient installations. Depending on your financial situation, this could include anything from a fresh coat of paint to remodeling the kitchen and replacing old windows.

Reverse Mortgage

The more you own in home equity, the more options that are available to you. For example, if you are over the age of 55 and have a large amount of home equity built up, you could consider getting a reverse mortgage, which would provide you with extra income through funds drawn from your home equity.

With a reverse mortgage, you are able to turn your home’s equity into cash payments that can supplement your retirement. The benefit of a reverse mortgage is that you don’t have to sell your home, but you will still have to pay taxes and insurance.

Downsizing

In most cases, the home you currently live in is larger than what you need for retirement. Downsizing to a smaller, less expensive property will put money directly into your pocket through the sale of your current home. The equity tied up in your current home will be freed up and this can then be used to fund your retirement lifestyle or can be reinvested into another property.

Renting Out a Portion of Your Home

If you have any extra space in your home, whether that’s a basement suite or a spare bedroom, consider renting out the space. Especially if you live in a university town, you could rent out the space to a graduate student.

An alternative option could also be listing a portion of your home on a short-term or long-term rental site. This could generate passive income while at the same time increasing the housing supply in your community.