The decision to downsize is not an easy one to make. Whether it’s from kids leaving the nest, looking to move closer to the city, or wanting to free up some wealth to support your retirement, shifting from a large to a small house comes with many changes. But how can you know if it’s the right decision for you, and how small should you go? Are you being blinded by the downsizing delusion?
What time is the right time?
For many couples, the best time to downsize is after the kids have moved out. But for others, they’d prefer to wait until after grandchildren have been born so as to keep the extra space for babysitting and sleepovers. There is no right or wrong time, just times that are better than others. Consider how much you’d miss the extra space – be it storage, spare bedrooms or bigger living areas. If you wouldn’t miss it, then you’re ready.
What does success look like?
Determining the success of your downsize ultimately comes down to what your objective is. If you’re looking to make a profit in the transaction, then money left over after selling one and purchasing another home will mean you have succeeded. If reducing labour and household maintenance is your end goal, then a smaller house with less rooms to clean will be right for you. It’s important to assess your priorities and what you want to get out of the move before you start your shopping.
Are there other ways to free up finance?
If the major driver behind downsizing is monetary, there are other options to consider. Once you have built up enough equity in your mortgage, you can redraw from the bank and use the extra cash for a holiday, new car or even a renovation. Speak to your mortgage broker or financial advisor to see if this is an option for you.
It’s not all profit
When you sell your home to purchase another, it’s important to remember that it’s not as simple as sale price of house A – purchase price of house B = profit gained. There are a number of other expenses to factor in, including but not limited to; stamp duty, taxes, rates, moving costs (further discussed below) and real estate fees. Although a smaller property is generally a less expensive one with smaller mortgage repayments, you will need to assess the other associated costs in order to determine whether you will be coming out in front or not – it could be a nasty surprise down the track otherwise!
The right fit
Going from big to small naturally comes with a reduced amount of space. How small can you go before you can’t fit your life into the new property? This is an important question to ask yourself. To help you decide, take a tour of your existing home, marking out everything that you’d want to take with you in the move. Map out in your head how much space it will all take up. If you want to keep three beds, big couches and a pool table, that two bedroom apartment might not be your best move. Be realistic with your requirements and how they will fit into your new lifestyle. Here’s where some tough decisions will have to be made.
Cost to move vs. Cost to replace
An unfortunate fact of moving is that it’s expensive. Heavy and large items are difficult and costly to relocate. When moving an entire household of possessions, costs can quickly add up. Unless your furniture is an antique, heirloom, or a personal favourite – in some cases, simply replacing it is more cost effective than taking it with you. If you can sell some of your bigger items like beds and loungesuites via online marketplaces like Gumtree or eBay, or even the Trading Post – you even have the added benefit of making a few dollars to help with purchasing a replacement!
Everything considered, after it’s all said and done you may still find yourself questioning your decision. It’s not uncommon for downsizers to find the move difficult at first. Stay patient, all new things just take a little time.