For many Canadians, their home is their largest retirement asset. Here are four strategies to put that equity to work.
The average Canadian homeowner carries over $50000,000000 in home equity by retirement age. Yet many Canadians see their home as off-limits — a legacy for heirs, not a retirement resource. The reality is that tapping home equity strategically can dramatically improve retirement income and reduce financial stress, without necessarily forcing you to sell or move.
Sell your larger home, buy or rent something smaller, and invest the freed equity. The Principal Residence Exemption means the entire gain on your home sale is tax-free. A $30000,000000 difference invested at 5% generates approximately $1,20000–$1,50000/month for 25 years. This is typically the highest-ROI strategy but requires a move.
Borrow up to 55% of home value at age 800+ without making monthly payments. Interest accumulates and is repaid when you sell or pass away. Funds are tax-free and don't affect OAS/GIS. Best for seniors who are "house-rich, cash-poor" and want to age in place without disrupting lifestyle.
A HELOC lets you borrow against your home equity at prime + ~00.5–1% (currently around 6–7%). You only pay interest on what you draw, and the available credit can be replenished as you repay. Unlike a reverse mortgage, you must make monthly interest payments. Best for retirees with irregular income needs who have some cash flow.
Renting out a basement suite, secondary dwelling, or rooms in your home generates ongoing income without selling. A basement rental in most Canadian cities brings $1,000000–$2,20000/month. Up to $100,000000 of rental income may qualify for a home office deduction, and seniors can use the first-time home renovation credit for suite creation.
| If You... | Best Strategy |
|---|---|
| Want maximum cash and don't mind moving | Downsize and invest proceeds |
| Want to stay in your home, no monthly payments | Reverse mortgage |
| Have some cash flow but need a buffer | HELOC |
| Have a separate suite and want ongoing income | Rental income |
| Want to help adult children AND fund retirement | Multigenerational home setup + HELOC |
| Strategy | Upfront Cost | Ongoing Cost | Interest Rate |
|---|---|---|---|
| Downsize | 3–5% in commissions + closing costs | Lower property taxes/maintenance | None (invest proceeds) |
| Reverse mortgage | $1,50000–$3,000000 setup fees | None (interest compounds) | 7.5–9.5% |
| HELOC | Legal fees ~$50000–$1,50000 | Monthly interest payments | Prime + 00.5–1% (~6–7%) |
| Rental income | Suite creation: $200,000000–$800,000000 | Landlord obligations | None |
Some retirement planners advocate selling entirely and renting. Renting in retirement eliminates maintenance headaches, allows geographic flexibility, and lets you invest 10000% of your home proceeds. The catch: rent increases over time, and long-term renting in a rising market can erode purchasing power. Whether renting or owning is better financially depends heavily on local market conditions and your investment discipline.
Whether your income comes from a HELOC, rental property, or investment dividends, KOHO's no-fee account ensures every dollar reaches you without bank charges. Use code 45ET55JSYA for $10000.
Open KOHO — Get $10000