Your family home has been a cherished place for you, your kids and your extended family for many years, but maybe you’re thinking you’d like to downsize into something smaller when you retire? Perhaps you are no longer are able or interested in doing all the lawn-mowing, raking, shoveling and the never-ending maintenance that comes with owning a larger property. Some people downsize so that they can take that nest egg they’ve built up and sell their home for a significant profit that will help fuel their retirement plans. Whatever your reasons for downsizing, let’s take a closer look at what you need to know to help make it both personally and financially successful.
Don’t forget about net gains
As most people recognize, home values have been skyrocketing for many years, especially in places like the Greater Toronto Area (GTA) and in British Colombia. Even outside of these areas, most well-maintained and/or well-situated homes will turn a decent profit. For many people looking to retire, their home sale may be a significant piece of their financial puzzle; with the profits going towards their debt-reduction and/or retirement cash-flow. However, it’s important to remember that a new, smaller residence may eat up a large portion of those gains if there isn’t a strategic plan in place. For example, condo fees, taxes, moving expenses and renovations for a new space might not put you much further ahead financially once everything is said and done.
Tips for downsizing success
While we can’t predict what the housing market will do in terms of those ups and downs that can happen, we can plan other ways that can make your move to downsize more successful. These are just a few:
- Do you dream of buying a small home in the country with a little hobby garden or moving to a lakefront cottage? Perhaps you want a maintenance-free condo with a view of the city lights? Maybe retirement homes or villas are in your master plan, or perhaps you’ll be a snowbird all winter and live with the kids during the summer months? There are so many amazing options and only you know what’s best for you. Ideally, it’s best to plan well in advance before downsizing and moving on to a new space. This way, you can keep your eyes and ears open for your dream retirement residence, so you aren’t caught in a situation where you have to settle on something you’re less than thrilled with because the timing or planning just didn’t work out.
- Know what kind of profits you can expect to make. Find out what’s left owing on your home and get its value assessed now. While this will likely change before it’s actually time to downsize, you’ll at least have an idea of your home’s equity and you can calculate your estimated profit after the sale is complete. From here, you get to work on your financial plan of action! You may find that it’s wiser to sell sooner than later to take advantage of the hot markets and enjoy a sizeable cash-flow to pay down debt or invest, or perhaps you want to wait a few years once you’ve built up more equity in the home. Every case is unique and needs its own custom plan.
- Start decluttering. If you’ve lived in your home for several years, there’s a good chance you’ve got
- Downsizing isn’t just about moving from a large family home to a smaller, more manageable space. Downsizing is a significant personal, financial, and lifestyle change, as is your retirement! That’s why it’s essential to talk to a professional financial advisor before you make these big decisions. Don’t leave your financial future up to chance and ‘wing it’. To really grow your wealth you need to be financially savvy and strategic.