Is Downsizing The Right Move For You?
The kids have finally left the roost and you’re tired of mowing lawns that are never played on, dusting vacant bedrooms and cleaning bathrooms that are barely used. You’re dreaming of all the things you could be doing like fishing, dining out and travel.
It’s that next stage of your life when the appeal of selling up and moving to a smaller, more manageable home is becoming increasingly convincing.
Four reasons to downsize:
- Freeing-up equity
- Reduce expenses
- Sea change
- Simplified Lifestyle
Downsizing is popular among the over 50s. It’s an important step that can free-up funds and offer a more convenient, less stressful lifestyle. But to maximise the full potential of downsizing, you need a carefully devised plan. If you rush the process without understanding your goals, the drawbacks could very quickly outweigh any benefits.
Popular reasons for downsizing include:
1. Freeing-up equity
The opportunity to tap into the equity of your existing home can be extremely tempting. All that extra cash to live off! Unfortunately, many people fail to do their sums before downsizing and walk away with little in the exchange after stamp duty, legal fees and bank charges. Desires to downsize are often compatible with wanting a fuller lifestyle, which could mean moving to a more expensive location. Suddenly, you’re left with a smaller home and not much to show for it. If you intend to gain financially, you might want to consider downsizing and moving to a cheaper area.
Be prepared though. A sudden rush of money from equity being converted to cash can be irresistible. Impulse purchases on lavish holidays or that Porsche you always dreamed of will very quickly reduce a lifetime of mortgage repayments to nothing. Get some financial advice so that your money is managed carefully and invested wisely to banish the temptation to squander.
The right advice will also minimise tax implications and ensure your social security entitlements aren’t effected if you’re retired (a sudden rise in the bank balance may cause Centrelink to review your pension entitlements).
2. Reduce expenses
A smaller home often means cheaper rates, insurance, energy bills and mortgage repayments (if you have a mortgage!). If this is one of your primary goals, you need to do some homework before you buy to maximise savings opportunities.
For example, apartment and unit complexes come with body corporate rates, which can be costly. And if you want to save on energy bills, consider buying a property with good insulation and energy efficient appliances.
3. Sea change
The desire to change scenery either to the coast, the country or to the hustle and bustle of the city often coincides with wanting to downsize. The problem is, people tend to sell up and move away from their friends and family to some destination they know very little about only to regret it 6 months later. Living in a place full-time can quickly bring reality to a lifestyle you’ve dreamed about for years, often resulting in disappointment.
If you rent before buying, you’ll be able to get a feel for a place without committing. After a few months, you may decide you actually want something very different.
4. Simplified lifestyle
Smaller homes generally require less cleaning and upkeep. And if you move into an apartment or unit complex, many of the maintenance issues are taken care of by the Body Corporate, allowing you to spend time doing the things you enjoy.
Because smaller homes tend to fit less ‘stuff’, downsizing is a great time to de-clutter. Over the years, we can accumulate draws filled with unwanted possessions. Clutter is a known cause of stress – the less we own, the simpler our lives become.
In a nutshell
Never make hasty decisions you might regret. Identify your reasons for downsizing before you take the plunge.
What do you want to achieve?
What type of lifestyle are you seeking?
What will you do with the proceeds from selling?
Consider renting before you buy. This way, you can invest your money while you take time making sure your next move is the right move.
Our last tip?
Sell first then buy (unless you can comfortably afford 2 properties). Buying before you sell can be a risky gamble because you then have the pressure of selling within a limited time frame.
If you plan carefully and seek the right advice, downsizing can be a rewarding change giving you more time and money to tick off your bucket list!
Have you ever downsized? How did it affect your life?
REALas predicts property prices
REALas predicts property prices – Australia wide including auctions and private sales.
Between April 2016 and May 2017, the median accuracy of REALas predictions was within 5% of the final sale price. REALas predicts potential final sale prices for properties currently advertised for sale.