At some point in your life, you’ve likely considered downsizing your home, but often it isn’t until retirement that the idea can feel like a no-brainer. Once the kids have moved out and you’re thinking of travelling more, downsizing can be an excellent solution.
Whether it’s freeing up extra capital for a second home elsewhere, or just being able to use the additional funds to improve your lifestyle and financial situation, downsizing is an option you should consider as you retire, but it definitely isn’t for everyone. Learn more about the benefits and drawbacks and how the process works so if you choose to move forward, you’re prepared for what comes next.
What Is Downsizing?
To put it simply, downsizing is the process of selling your current larger home and opting to purchase something smaller like a townhome, condo or bungalow. It’s about letting go of the extra square footage that becomes unnecessary and difficult to manage as you age and trading it in for more money and flexibility.
Benefits Of Downsizing Your Home
There are lots of benefits to downsizing your home but typically, they fall into two categories: practical and financial. In Canada, some of the most common reasons for downsizing are as follows:
1. To pay off a mortgage or other debt
2. To reduce monthly bills (hydro, heat and municipal taxes)
3. To be closer to family or loved ones
4. To reduce the amount and strain of housework, yardwork and maintenance
5. To free up extra money for retirement
6. To provide peace of mind for snowbirds who don’t live in their home year-round
There are a lot of benefits to downsizing and freeing up the extra capital to help make your retirement more comfortable can be a huge swaying factor. Regardless, it’s very important that you also understand the costs associated with the process so you don’t wind up losing the extra cash you needed in the first place to pay off unexpected expenses.
What To Expect If You Downsize
Downsizing or making a major move, especially as you age, can be overwhelming. There’s a lot of things you’ll have to consider and some that may not have even crossed your mind. Cleaning, sorting, packing, managing the sale of your home and being aware of your stress and mental well-being throughout the process are all things you can expect to juggle if you choose to downsize.
Costs Of Fixing Home
Even though the housing market in Canada is currently booming, it’s likely that the house will need a bit of TLC before being put on the market. This could mean a fresh coat of paint on the walls or exterior, replacing some older light fixtures or something bigger like a kitchen renovation or new AC unit. Some homeowners will also want to have their home staged, as once they’ve purged their older possessions, they likely won’t have a lot to work with in terms of making the home look cozy and lived-in. Any costs associated with fixing up or staging the home should not be overlooked as they can add up fast so being prepared to budget for them is integral.
Parting With Possessions
Decluttering and parting with possessions can be the most difficult part of the process. for many people. Later in life, you’ve likely managed to accumulate a lot of things (way more than you ever imaged you could) that you’ll have to sort through and look at objectively. This can cause a lot of extra strain on the whole family as parting with possessions after 30 – 40 years can be very difficult. If you find yourself in a position where some very important items won’t make it to your new home, you may consider adding monthly storage unit fees to your budget if those possessions are absolutely priceless and cannot be parted with in good conscience.
Selling, Moving Andn Buying Costs
The whole process of selling your current home, buying a new one and then getting everything moved over can be a lot to manage. You’ll encounter many costs as you move through this process including total insurance, legal fees, Realtor® commission, land transfer taxes, moving expenses, the cost of new furniture to fit in a smaller home and even condo or housing fees depending on which type of home you buy.
Determining If Downsizing Is Right For You
Where you live, your family dynamic and the kind of lifestyle you want for yourself can all be key factors in determining if downsizing is right for you. Ask yourself the following questions to help you get a better idea of whether it’s a good fit:
1. Do you have a substantial amount of equity tied up in your home?
2. Do you want to buy a vacation property in your winter destination of choice?
3. Do you currently need or use all the space in your home?
4. Could you use some of the money to fund your snowbird lifestyle or daily expenses?
5. Are you very tied to your current neighbourhood? Downsizing could mean relocating elsewhere.
6. Would you consider yourself or your spouse a packrat/avid collector? Downsizing will mean a lot of purging and organizing.
7. Do you still have any dependents living at home?
If you’re considering downsizing, it’s important to understand that there’s more than one way to downsize and each will have its pros and cons. Learn more about your options so you can determine which one may be best suited for your personality, needs and lifestyle.
Moving To An Area With Lower Cost Of Living
If you’re not rooted to your neighbourhood or city, and are open to the option to look for housing elsewhere, you could save a lot of money by relocating to a location with a lower cost of living. Whether that’s across town or across the province, there’s money to be saved for those who are flexible in location. Do some research to see what comparable houses are selling for in your current market and then check out a few other areas you would consider moving to as well to compare the costs and amenities.
There are lots of retirement communities popping up in Canada for seniors 55+ and they offer many different options when it comes to housing with bungalows, townhouses or apartments to choose from. This could be a good choice if you’re looking for a sense of community and belonging with the added perks of amenities, activities and services aimed directly at the 50+ crowd.
Buying A Condo
You can find condos all over Canada, but they’re especially prevalent in larger cities. Some of the major perks of condo living include no shoveling snow, no cutting the grass and no general maintenance or upkeep when it comes to major things like the roof, foundation, driveway etc. Condos are also a great option if you plan to do a lot of travelling as you age since you won’t have to worry about leaving your house unattended for long periods of time. You can lock your door and leave knowing the building has security you can rely on. Downsizing from a large home to a condo could be a difficult transition due to the decrease in square footage. You’ll also have to factor in the requirement to pay monthly condo fees for general upkeep and maintenance of the building. If you’re considering a condo, try to find a building with the amenities you want (pool, gym, party roof, rooftop deck etc.) so that if you have to pay condo fees, at least they can go toward amenities you’re actually excited about.
Renting A Condo Or Apartment
Making this choice can seem scary, especially after owning a home for so long but this option is still an important one to consider. Choosing to sell your house and then move into a rental unit, will free up all the equity in your home, and for some people, that makes the most financial sense. You can invest the money you make from the sale and live off the income it generates for you as a result.
Finding A Smaller Home That Suits Your Needs
Downsizing can quite literally mean selling your current large home, buying a new, smaller home and pocketing the extra cash you’ll make along the way. It’s important to consider your needs when downsizing as sacrificing space often means sacrificing other things, too. Make a list of what you absolutely need in a smaller home so you don’t wind up downsizing into something that although more manageable, doesn’t actually work for your lifestyle.
Downsizing can be a great option for Canadian seniors, but it’s not the only choice you have so do your homework to find the solution that works best for your lifestyle and needs. Consider the extra costs (financial, personal and emotional) that may come with downsizing and make sure to ask yourself the right questions so you can determine if it’s the right for you and your family. Want to learn more about all your options as an aging Canadian homeowner? When you’re ready to talk, our team can help.