5 Things to Consider Before Downsizing

Whether your kids have flown the nest or you’re dreaming of a mortgage-free life, downsizing might be on your to-do list this year. While it can provide several financial and personal benefits, it’s important to consider the impact it’ll have on your lifestyle. Today, C&G presents 5 things to think about before you commit to downsizing.

1. Check your profit margin

It’s important to remember that the sale price of your current property less the cost of a smaller property isn’t going to be your profit margin. There’s a number of costs associated with moving, from real estate agent fees to stamp duty. In rare cases, you may even be subject to capital gains tax. Yes, smaller properties generally lend themselves to smaller mortgages, but be sure downsizing is the right option for your financial situation. Don’t let go of a large asset too hastily.

2. You’ll be giving up space

Before downsizing, really think about whether you can live without that extra bedroom, that large garden or spacious family room. If you’ve had children, there could be grandchildren on the way. Will you be happy with a smaller space should they come to stay?

3. There might be other options

If your desire to downsize is purely based on financial factors, there may be other less disruptive options available to free up the cash you need. If you’ve got substantial equity in your current home, you may be able to withdraw a proportion of that to fund a holiday or large purchase. Alternatively, you may be able to secure a personal loan against your asset. Consult with a trusted financial advisor before making any decisions.

4. There’s no going back

Depending on when you bought your current home, you may be part of a generation who have witnessed substantial increases to the value of property. This means that downsizing - should it not suit you -  may price you out of the community in which you live, or the property type you’re accustomed to. Example: if you purchased a four-bedroom property in Elwood in 1990, it could now be worth over $2million. If you sell up and downsize, would you ever be able to afford to buy back your old digs? Whilst this may not be a concern for dedicated downsizers, for those still considering the move it’s a matter for meditation.

5. Will a smaller property suit your needs?

Smaller properties in urban Melbourne are often found in apartment buildings or on subdivided blocks. While this may suit now your circumstances now, look to the future. Is the property accessible? Will you be able to walk the flights of stairs in ten or twenty years’ time?

While there are many factors to take into consideration, downsizing is often a terrific solution. You can free up cash to fund your retirement or help your children get into the property market themselves - and as you grow older, you may realise your home is simply too big for your lifestyle. If you’re considering downsizing, speak to Chisholm & Gamon about how we can support you through this important process.


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