Downsizing your home can be an exciting time in your life, marking the commencement of a new chapter - whether you are an empty nester, entering retirement or simply looking to utilise a smaller living space.
It’s important to understand that when it comes to downsizing, there are a number of factors to consider including whether you are physical or financial downsizing, the location and budget. Taking these factors into consideration, we’ll provide a handy guide to help you on your journey to downsizing your home.
Put simply, downsizing is moving from one home to another that may be either smaller in size, value or both. Downsizing was once a term applied solely to retired Australians looking to transition away from their family homes, however with the evolution of living arrangements and job flexibility in recent years, more and more Australians are making the switch in order to better both their lifestyle and financial position.
Physical downsizing
Physical downsizing means moving from one home that may have four bedrooms, to another home that may instead only have two bedrooms. For example a married couple may physically downsize from their their family home to an apartment once all their children have finally moved out of home and they no longer need the space.
Financial downsizing
Financial downsizing means selling a home to either purchase another home of lower value or rent. Although the ‘new’ home may be of lower price point value, the home may actually be larger in size - particularly if moving from a capital city to a regional or rural property. For example, a young family who have the flexibility to work from home may choose to sell their medium-sized urban home and move to a regional area with farmland or a quiet beach. The house itself might be larger than their previous one, but the cost of property in this new area is much less than the cost of their home in a major city.
There are a number of factors that are important to consider before you start searching for your new home, including the property itself and the suburban area where it is located. Take your time to think on what you love about your current home and also the area you live in.
Consider the following questions:
- What do you like about your home?
- What could you do without?
- How many rooms do you need?
- Do you want to move somewhere calm and quiet, or busy and populated?
- Are there particular amenities including supermarkets, doctors, public transport that you want or need close by?
To help narrow down a potential location for you to downsize, take advantage of a free property report with loans.com.au. Each report includes an estimated price range for the property, recent sale prices for similar properties in the area, details of nearby properties that are on the market, information on the suburb’s performance and a suburb profile.
Before you commit to a property in a particular location, ensure your new home suits your lifestyle, budget and level of independence. Consider how much you can sell your current home for in today’s market. In some cases, it may be less than the smaller home you’ve had your eye on, depending on where you are looking to buy.
Some major costs to consider when downsizing include:
- Buying and selling in the same market
- Real estate agent fees
- Stamp duty
- Legal fees
- Body corporate or strata fees
- Furniture removal and storage
To achieve your downsizing goal, loans.com.au offers a range of competitive home loan options.
Determining the right time to downsize is individual, based on your own life goals, financial position and lifestyle desires. Retirees aged from 60 and above are more common to downsize, given they have less need for a large family home than they may have 15 years ago. There is in essence no right time to downsize, yet if you have unused rooms in your home, are struggling to pay bills or mortgage repayments or finding it difficult to maintain aspects of your property, it may be the perfect time to consider downsizing.
Pros
- Increased cash flow — Downsizing has the potential to free up equity to pay off your mortgage, invest or put towards superannuation.
- Easier to maintain — Downsizing to a smaller area means less area to clean and maintain.
- More convenient — Downsizing can allow you to choose a home layout and fittings that better suit your individual needs.
- Lower insurance and utility bills — Downsizing to a smaller home will generally cost less to insure and is cheaper to heat or cool.
Cons
- Less space — Downsizing may mean less space, therefore it’s important to factor in how much space you will need to live comfortably.
- Limited flexibility — Downsizing may mean less privacy, fewer guest rooms, or less space for entertaining.
- New area — It may take time to become accustomed to a new area when downsizing if you are not familiar with the location.
- Emotional connection — Your family home may be full of memories, which can make it difficult to let go.
If you’re ready to purchase your next home, or you are simply curious about how much you could save by downsizing to a smaller property, book an appointment with one of our lending specialists today to see how we can help!
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