What to consider when downsizing
It’s the great Australian dream: to own a house in the suburbs with a big backyard for the kids. But, with the kids gone and you reaching retirement (if you’re not already retired), is it time to downsize?
Moving out of the family home to cheaper and smaller accommodation isn’t an easy decision, but in many cases one that has to be made, due to either costs in the upkeep of the home or for health reasons.
A study by the Australian Housing and Urban Research Institute found that 43 per cent of survey respondents who had relocated had downsized, with around half downsizing or moving only once since turning 50. It also revealed that out of its respondents, 91 per cent of downsizers reported being either mostly satisfied or very satisfied. Now, that’s good news.
While the motivation for downsizing is different for everyone, the most common reasons for relocating was a change in lifestyle, being closer to family and financial gain. By moving into smaller and more affordable housing, insurance premiums may be reduced and for those who haven’t finished paying off their mortgage, it could mean a lower mortgage repayment or paying it off outright.
If downsizing is starting to sound appealing, here’s what you need to know.
What’s best for you?
Talk to your partner and your family to gauge your motivations for wanting to move. Is it financial? Would you like to be closer to your grandchildren? Or, would you like to live by the coast? Whatever your reasons, be mindful of why you want to downsize. That way, if you experience challenges along the way, you’ll always have that picture in the back of your mind of why you’re making the move.
Make the tough calls
The family home carries within its walls a lifetime of memories so it can be difficult to say goodbye to it. In many cases, you’ll need to sell or give away some of your belongings because a smaller home means limited space. However, take this opportunity to look at what you have and what you really need.
This can be a great way to finally say goodbye to those old lawnmowers in the garage that no longer work. Ask for help from your family, friends and neighbours since this should be a time of celebrating the old and embracing the new.
Do your homework
The internet has made it much easier to find housing anywhere in Australia. While many suburbs are dominated by large family homes, there are growing pockets in all capital cities and large regional areas, particularly those towns popular with retirees, which have medium-density housing suitable for older couples.
Write down what you’re looking for in terms of location, property and price to narrow down your search and then keep on top of available listings, either online or with a real estate agent in the area you want to move into.
Will downsizing affect my pension?
Selling the family home is one way to free up cash for retirement, which can then be reinvested into shares, term deposits or superannuation. However, if you’re receiving any kind of government pension, then this is going to be affected.
While the family home is exempt from the assets test, if you sell your home and come up ahead with a profit of say $300,000, the money will need to be included in the assets test. As the age pension depends on what your assets are worth in this test, it’s best to speak to a Department of Human Services Financial Information Service officer.
Whatever your reason for downsizing, make sure you’re fully aware of what you want, what’s best for you and how moving may impact your current circumstances. If in doubt, speak to family and friends or seek professional advice from a financial planner.
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