Consider these options before downsizing your home
DAVE Hanson, assistant manager, JN Bank, says there are several factors that seniors should consider before making the decision to downsize their home after retirement.
He noted that this decision should not be taken lightly or made in haste, pointing out that ultimately the choice comes down to individual circumstances.
Hanson outlined some factors to consider:
Cost of buying and selling
Downsizing for retirement is a great way to save money on mortgage payments, property taxes, insurance, utility costs, and more. Hanson said that retirees may also be able to cut back on maintenance and upkeep services like lawn care when they downsize from a large home to a smaller one.
However, he said buying and selling real estate is an expensive venture, pointing out that while most people may be thinking about the money they’ll make from selling their home and the subsequent savings from living in a smaller unit, they should also bear in mind the costs associated with selling their property. “Selling your home comes with significant expenses. You may have to update your home to get the best price, and you could lose up to around five per cent in realtor commissions, if you choose to use a realtor. There are also legal fees, as well as other tax-related expenses,” the JN mortgage expert advised.
He said retirees should also consider the cost of buying a new home. “Home repairs, inspections, real estate fees, closing costs and moving expenses can quickly add up when moving out of your home.”
Compare expenses for old and new property
According to Hanson, the decision to sell requires totalling all the costs associated with moving to see if it makes financial sense. He recommended that people prepare a table comparing their old property with the new one. “Look carefully at all the major expenses. Will the new home have higher or lower utilities, for example? Will the new home have greater or less commuting or travel costs to visit loved ones, run errands, or getting to work? Consider insurance expenses, property taxes, maintenance costs or dues, and expenses before moving. The differences can be huge and surprising based on where you choose to live,” he remarked.
Emotional ties to your home
At the same time, Hanson added that the sentimental value of the property must also be considered. He said many people might find it difficult to sell and move out of their family home because of the memories and emotional ties. “It’s the place where you raised a family, spent time and money renovating to your liking, and hosted gatherings. It may be hard to say goodbye to the home and all the memories that were made there,” he said.
Health concerns
Seniors with mobility issues may also want to consider their options carefully, Hanson remarked. “As you age, your health will become a determining factor in all decisions. If you, or your spouse, have mobility problems, a one-storey home probably is not the best place to live. Therefore, downsizing to an apartment building with several floors or a townhouse might not be the right option for your circumstances,” he said.
Hanson noted that people who currently live in a home with few stairs or with everything on one level should perhaps consider remaining in their old home. “If it’s a large house with rooms that aren’t being used, you could consider renovating the home to transform it into a rental property. That way you can earn extra cash to fund your new lifestyle.”
On the other hand, he said serious health concerns may also be a reason for downsizing and moving to a smaller community or a home that is closer to friends and family.
The JN mortgage expert said at the end of the day the decision to downsize in retirement is a personal one. He advised that persons should crunch the numbers. Calculate the upfront costs of moving and compare them to the yearly savings they’ll realise. “A small gain probably isn’t worth the trouble, but substantial savings might make selling the best option for you,” he said.