Your home is more than four walls and a roof. (And hopefully a floor.) For owners with significant equity in their homes, it can also be a money tree. For Fools, the trick is in deciding whether, when, and how to start harvesting that cash. Early in retirement? Later? Or never?

That's a personal decision. Your home is one of the biggest investments you'll ever make, and an important symbol of security and stability. Transforming some or all of a home into capital is not a decision anyone should take lightly.

Even in retirement, we've all got to live somewhere, whether we rent or own that domicile. Most folks entering retirement own their homes, and most have either totally or nearly paid off their mortgages. Some will sell and trade down, others will sell and rent, and some will simply stay put (and enjoy living rent- and mortgage-free). A few might even buy a bigger, more costly home. Figuring out which of these options works best for you requires a bit of Foolish planning.

Home is where the wallet is
Longtime homeowners know that their homes have likely increased in value since their original purchase -- even after the housing market's declines. Often, that equity represents a princely sum that could yield an even greater return if invested elsewhere. 

Selling is one way to get at that cash. Current tax law allows you to sell your home and receive gains of up to $250,000 ($500,000 for a couple) totally tax-free. So Fools could sell their current abode and buy a new, smaller home by making a minimum down payment on a 30-year mortgage. (Lenders love to carry retiree mortgages, because they have a very low default rate.) Whatever cash is left over could go into a Foolish investment that generates enough interest to cover the ongoing mortgage payments.

Maybe you don't want the hassle of home ownership again. Instead, you plan to sell, invest the cash, and rent. The success of that plan depends on how much rent you will pay in retirement. A home mortgage tends to be relatively stable, but rent has a nasty habit of increasing every 12 months. If you can invest your money to pay for those ever-increasing bills, a lease may be an option worth considering.

Many retirees want the security of not having to pay rent or a mortgage. There's nothing wrong with that. Instead of the scenarios outlined above, you could just stay where you are. Alternatively, you could sell and buy a cheaper home entirely in cash, investing any leftover funds to give you additional retirement income. Cash left over from the sale could then be invested to throw off additional retirement income for your use. 

Your house is a piggy bank
In any event, you can still get at the equity tied up in your home through one of two ways in most states: a home equity loan (HEL) line of credit, or a reverse mortgage.

A HEL is nothing more than a loan secured by using your home as collateral. Because it's a loan, it must be repaid with interest. Repayment starts immediately, usually in the form of a monthly payment based on a 15-year amortization schedule. For emergency cash, a HEL is a good vehicle. As a means of regular income, it's not the route to take. If you need the loan as income, chances are you can't repay it, and you'll risk foreclosure.

A reverse mortgage is a means of receiving regular, untaxed income as a loan against the equity you have in your home. The total loan amount is usually fixed, and may be paid as a lump sum or in monthly installments over a fixed period or for life. Unlike the HEL, though, this loan doesn't have to be repaid until you die or sell your home. Then you or your estate repays all loan proceeds with interest. The beauty of this loan is that it doesn't have to be repaid until the house is sold, and your legal obligation for repayment is limited to the value of the home at that time. If the home declines in value, you will never owe more than your equity in the home on its sale. For elderly people living alone who are in need of cash, a reverse mortgage is definitely an option to consider.

Whether you own or rent, sell or stay, recognize that your house is more than a home -- it's a source of monetary value that you can use when you need it. Deciding when and how to do so is up to you, Fool.

Next up in Step 9: More on covering and cutting expenses after you retire.