Tuesday, October 2nd, 2018
Deciding whether or not to downsize your home is one of the biggest decisions you’ll make in your life. As children grow, or life circumstances change, the need for a large family home may no longer be as important and thinking about reducing living space (and the stress that can sometimes go along with managing a bigger property) is a natural evolution. You might want to access equity that could see you live a better retirement, or you might want to trade up in price and take on a new mortgage for an inner-city penthouse that offers less maintenance and the increased lifestyle benefits that can come from smaller space and no rambling garden to worry about.
But when is the ‘right’ time?
It’s normal to feel emotional about saying goodbye to a home that you’ve loved for years. Buying that property likely meant many sacrifices and in thinking about giving it up for a smaller home, it can feel like your hard work was for nothing.
But think again and put things in perspective. Your home was bought for a reason and if you are thinking about downsizing, there’s a reason for that as well.
Before making any major decision – especially ones that are associated with finances – it’s prudent to make a list of potential pros and cons to properly crunch the numbers and compare both positives and negatives.
Once things are written down in black & white, you can realise what you think you might miss, what you’re actually going to miss and what you could, potentially, gain in the process. Having this kind of clarity can help separate the emotions that might seem overwhelming.
Your new home will be a place to create new memories you can’t even imagine yet. Try viewing it as an adventure to help you decide if it’s something you can look forward to with excitement, rather than worry.
There are many things to think about to help you work out if now is the right time to downsize your property. Here are a few things to consider:
What are the main triggers behind your decision? For older people facing physical impairment, trading a two-storey home for a single-level dwelling that means so climbing up and down stairs every day can be a blessing. If your property is becoming too much work and too expensive to maintain, it’s a great reason to start considering a more workable solution for your sustainable future. If too many areas of your house go unused and are filled with items that feel like they are in storage, it’s a good time to re-think the way you live and declutter to a smaller space.
Depending on where you plan to move to next, downsizing could mean a healthy injection of cash flow to your bank balance. You may choose to use this to fund your retirement in style or look ahead to an even longer-term future and decide to leave a legacy for your next generation by reinvesting and buying an investment property, in addition to your primary place of residence you downsize to. Crunch your numbers carefully. Taking on an investment property could mean a small mortgage but with equity in your own new (smaller) home and money coming in from rent from your tenant, it’s a debt you could have paid off effectively and efficiently. Talking to your accountant, as well as a trusted loan broker will help you decide if it is the right thing to do for your personal financial circumstances.
To find out more about what downsizing can mean to your mortgage and future loans, talk to an experienced loan broker at Loans Actually today.