When you are reaching your retirement years and your children have moved out of the family nest, you will inevitably ask yourself, is it time to downsize into a smaller home?
It seems like a logical step. Your house has served its purpose in accommodating your family’s needs for a few decades, but now the swimming pool is no longer used, rooms sit vacant, and it is becoming difficult to maintain.
You may prefer to sell the property and buy an affordable apartment or a townhouse that may be in a completely different area, or somewhere closer to your children.
This all sounds plain and simple, but downsizing is quite a life-changing move, so you will want to think seriously about it before deciding. Here are four things you should take into consideration.
Your reasons and motivations for downsizing
You should consider your reasons for downsizing as you do not want to regret it later. Is the current home becoming too difficult to manage? Are you looking for a change of setting such as a sea or tree change? Do you want to reduce your debts or living costs by selling your current place? You may want to talk to friends who have already made the move, as well as to your children, so you can clarify your thoughts. Nothing is too trivial and you should always weigh up the pros and cons.
Where you will live next
When you downsize, what sort of potential properties do you want to live in next? For example, do you want to move into an apartment, townhouse or perhaps a retirement village? Do your research on potential homes you want to live in next and features such as single level layouts, storage space, and possible strata fees. Another consideration is the fact that with a smaller space, you will inevitably need to reduce your belongings, including much-loved items.
The costs of selling
Depending on where you live, the market may be a factor as to why you are selling as you might be able to capitalise on strong price growth. The income you receive from the sale of your home can be used to either buy a smaller home with potentially money left over, or you can put it towards your retirement plans.
However, depending on where and what you buy, and how much you need to spend on costs such as agent fees and stamp duty, you may not be left with much. Also, any extra cash you have may impact on your pension entitlements.
Alternatives to downsizing
On the flipside, you should also consider what you could do if you stayed put in your current home. You may realise you can remain in your house for another couple of years before downsizing, or that your children have plans to eventually return to it.
There are several things you can do to your property and these can help you build equity, especially if you plan to sell. You could rent out a room or a section of the house to a student or young adult, or you could renovate the home such as adding an extension or building a granny flat.
Downsizing is a big decision so it is important to always do your research and speak to a professional, such as a financial planner, if you need further guidance.