Thinking about downsizing?
Downsizing is a personal decision, and there are many things to consider when deciding if you should move out of your current home.
There are some questions you may want to ask yourself, your partner and your family that can help you see if this could be the right choice for you, with special focus on key areas of your life and desired living situation.
How much equity do you have?
You could sell your home to buy a cheaper property and use the profit (minus the closing fees and costs of moving into your new home) to help pay for your retirement. You can see how much equity you have in your home by determining the current market value and subtracting the outstanding mortgage on your home.
How much money will go towards paying for retirement?
How much you make on the sale of your home will depend on things such as whether you need to pay off a mortgage, if you’re buying a new place or if you’re moving in with family and won’t be paying for accommodation. You’ll also need to determine how much of that money will go towards your retirement, and how much will go to other financial commitments like personal savings and investments.
How much money will go towards paying for your new lifestyle?
It may be that you want to reinvent yourself in retirementOpens in a new window, taking the opportunity to travel or take up new hobbies. Downsizing may give you the financial boost you need to be able to pay for your dream retirement while also covering your day-to-day expenses such as bills and utilities, property taxes and maintenance costs. Having a retirement budget can help ensure you stay on track to cover your essential costs as well as leisure and entertainment.
What happens financially if you don’t downsize?
If you’re unsure about whether you want to downsize, you may still be able to leverage your property to help pay for retirement. For example, you could look into refinancing your mortgage to free up some money for retirement, or see if you qualify for a reverse mortgage.
Your current living space
What do you love now?
When deciding if you should move, it’s a good idea to think about what you love about your current home that you’re not prepared to live without in your new home. Make sure to separate your must-haves from nice-to-haves when making a list.
What do you use now?
A good way to gauge if you should or need to downsize is by taking stock of how you’re currently using your living area. Consider how much of the indoor and outdoor space in your home you use and how frequently. Also think about how this may change as you adapt to your new life in retirement.
What about your things?
Another thing to consider is what will happen to all your belongings and furniture in your current home. If you’re not able to take them with you to a smaller space, you could consider having a garage sale, donating items, selling them at auction, gifting to family and friends or putting things in storage.
Could you adapt your current home?
If you’re unsure about whether to leave your home, you may think about what you could to do your current living space instead of downsizing. For example, you could look at ways to adapt it to accommodate health or physical issues that might arise in older age. This might include installing medical alert systems, changing flooring, making modifications to bathtubs and showers, installing ramps and/or adding stairlifts.
Your desired smaller living space
How do you want to live?
Perhaps 1 of the most important things to think about is what you dream smaller home looks like. For example, you may want to move in with adult children, or move to a retirement community, assisted living facility or a condo. There are costs and lifestyle changes that come with each different option, which you should also take into consideration.
Where do you want to live?
You may want to stay in the same area, especially if you’ve been in your neighborhood for a long time. It could be that you’re looking to embrace retirement as a time to move somewhere new, either in Canada or perhaps in a warmer climate. Thinking about your desired neighborhood will not only help you picture your dream retirement lifestyle, but also your cost of living.
What can you afford?
When thinking about your desired neighborhood, it’s also a good idea to look at the average price ranges in that area. The idea of downsizing is to move into something less expensive, so it’s important to make sure you can find and afford a smaller home in your chosen area. If not, would you be willing to move further away?
What will your future needs look like?
If you’re downsizing into your forever home, it’s important to think about not just how the property will suit your needs in the short- to medium- term, but also as your grow older. You may want to think about accessibility or assisted living requirements when deciding where to live to make sure the home can accommodate your changing needs.
Your dream retirement
How will you stay in touch with loved ones?
If you choose to relocate, you may move further away from family and friends. If so, it’s important to have a plan to cope with the distance and think about how a move would impact your social life. If downsizing means leaving your social circles, plan to stay in touch either digitally or with frequent trips to prevent isolation.
Where do you want to spend your time?
It’s also a good idea to think about how much time you plan to spend in your new home. If you’re dream retirement involves being a snowbird or travelling often, this may mean leaving your property empty for long periods of time.
What do you want to do in retirement?
Ultimately, it’s important that your new home helps you get everything you want out of your retirement lifestyle, whether that’s a quieter pace of life spent relaxing, or a time filled with trying new activities. When considering downsizing, think about how living in a smaller space will impact your plans for how you want to spend your day-to-day life in retirement.