It’s that time of life where you think seriously, and not just romantically, about where you would ideally like to live. While you revel in the fact that you don’t have to wait to use the bathroom, there is no competition for the largest dinner plate and the washing machine isn’t used 24/7 anymore, you should ask yourself: do we really need all this space?
A large home that was once occupied by a full family can feel hollow once the children have moved on, which potentially (but not necessarily) makes for a good reason to market your property for sale and downsize.
Downsizing comes in several forms. It may simply be a smaller house, or a unit, villa or townhouse. Perhaps accommodation in an over-55s retirement village complete with amenities such as pool, clubhouse, gym, tennis courts, even a restaurant or cinema. You may opt to be close to city amenities such as museums, theatres, hospitals and restaurants, or head for the coast to enjoy water views and sunshine.
Downsizing has a number of clear benefits. A smaller property can be less expensive, thus reducing your mortgage or enlarging your retirement nest egg and its income stream. It will probably be easier and cheaper to maintain and, if you choose wisely, may be located closer to services and transport.
If you’re thinking of selling your home to improve your retirement lifestyle, there are likely to be many financial, practical and emotional factors to consider first.
Is Downsizing Cost Effective?
Downsizing is not all beer and skittles. It’s a life-changing move that needs to be carefully planned.
- Will you be close to family and friends?
- What will the children think of you flogging ‘their’ family home?
- What will you do with the decades’ worth of stuff that won’t fit into a more compact abode?
- What of your own emotional response to leaving the house where you’ve raised your children, and to disposing of all your much-loved treasures?
Of course, downsizing may not put extra cash in your pocket; in fact it can cost more. Upmarket apartments on the water or near the city often cost more than a four-bedroom house in a middle or outer suburb and you will lose thousands in agent’s fees on your sale and stamp duty on your purchase.
And if the move does leave you with extra cash, it may have an impact on your pension entitlements. All these issues need to be researched, discussed and resolved before you make a decision. Talking to a financial planner is a wise move. It will give you clarity on all the implications of selling your home – financial and otherwise.
Here are some points to think about when weighing up your downsizing options.
Benefits of downsizing
- It could enable you to capitalise on healthy real estate market.
- Selling your larger property and buying a smaller one should give you change.
- It could allow you to say goodbye to mortgage repayments.
- You could use leftover profit for travel or living improvements.
- You can free yourself of the shackles of all that ‘stuff’ collected over the last 25 years.
- It gives you the chance to change your decorating style, e.g. from antique to Balinese tropical.
- There will probably be fewer rooms to clean in the new abode.
- Hopefully smaller annual household bills.
- There are no lawns to mow in an apartment.
- It might enable you to live closer to family and friends.
- You could live on the doorstep of desired amenities (restaurants, opera, theatre, museums).
- If moving to a warmer climate it can aid health.
Disadvantages of downsizing
- You may be unable to sell your home for the price you want because of market fluctuations.
- A smaller place isn’t always cheaper. The closer it is to the CBD, the more expensive it could be.
- Selling your home could impact your age pension entitlements.
- What to do with all that ‘stuff’ collected over the last 25 years?
- Your furniture may not fit into the new, smaller space.
- You may miss people and services in your current area.
- You may find it difficult living in a smaller place.
- You may not be as prepared for the change as you’d like.
- ‘Free’ babysitting for the family may stifle your new-found freedom.
- The home you buy may turn out to be unsuitable down the track.
Avoid Downsizing Traps
Before considering whether or not to sell your home, it’s important to thoroughly understand your reasons for selling. Consider the emotional impact of selling your home and moving. Are you stressed about living in a smaller space (and many people are)? Why not try before you buy? Just live in your current home as if it was a lot smaller – simply lock the doors to the unused rooms and see if you can carry on your day-to-day living with no hassle or stress.
Downsizing your home has a lot going for it, including giving you the opportunity to finally sort through all your clutter and discard the various items you’ve hoarded over the years. But downsizing is not for everyone.
The key to downsizing successfully is to do your homework first. If you decide to go ahead, do it in your own time, according to the emotional wrench you are dealing with.