The strength of the current property market is encouraging an increasing number of owners to consider selling their family home and downsizing.
Thanks to the current boom in prices, if you’ve owned your home for many years, it’s likely you could do very well financially from this strategy right now.
But mistakes can be made when you downsize. To guard against them, you need to be diligent in your research of the property market, as well as your actual financial position.
You want to ensure downsizing will deliver the lifestyle you want. While you are likely to get an excellent price for your current home, you might find a smaller home – a detached house, townhouse or apartment – is surprisingly expensive to buy or maintain.
Quarterly body corporate fees for townhouses and units, especially in luxury locations, can quickly eat away at your cash flow if you haven’t planned for them.
Consult a qualified financial adviser before making the decision and work through the numbers to ensure downsizing achieves the right outcome.
Below is a five-point list of the common motivations and benefits from downsizing.
1. Reduce expenses
Many owners believe this to be the most significant benefit to downsizing. However, you should not assume this is an automatic outcome. Instead, work with your accountant or financial adviser to plan your strategy and make sure you have the money you expect, or need, as a result of downsizing.
2. Change of scene
After spending so much time establishing a family home, building a career and raising children, it’s common for homeowners to want to break free, start a new chapter in their lives.
3. Chasing your dreams
When your life changes, there’s an understandable urge to shake up everything. If you’ve retired or scaled back on work commitments, this is an excellent opportunity to achieve some of your life goals. If you downsize with the right strategy, you’ll be able to use the equity in your current home.
4. Children find new pastures
This is perhaps the most common motivation for downsizing. If you feel like you’re rattling around in your home, or cleaning rooms that haven’t been occupied for weeks, even months, then perhaps it’s time to make a move.
5. No surprises
While your children have moved out, they may still have an emotional attachment to the family home, but is it really about them now? Nevertheless, it is beneficial to talk to them about your plans in advance so they understand your reasons and support your decision. (and can hopefully help you with the move!)