Generally speaking, when people downsize, they are purchasing a home for less value than their existing property. Many have paid off their mortgage so downsizing allows them to free up extra cash. For others, they are able to pay off their mortgage and save paying interest. Remember, if you’re buying a new property, you’ll need to factor in things like moving expenses and stamp duty.
If you’re retired, downsizing can be a good way to help lower your household expenses. Although there are costs associated with moving homes, there are long-term savings that can be made. Less space usually means less heating, gas, cooling and maintenance costs. If you’re thinking about retiring in a few years, make sure you take a change of income into account. Bear in mind, there are some Government incentives for Australians aged 65 or over which you can read about here. When it comes to working out your current and future income, we always recommend that our customers get independent legal, tax and financial advice.
Moving from your larger family home to something smaller means you will probably need to let go of some household items. Visit your new home, or display home if you’re building new, to get a feel for what furniture will fit and what you might need to sell or give away. The extra furniture may be just right for one of your children’s homes and anything surplus could be donated to charity.
We’ve all heard plenty of stories from friends and family about the money they’ve made on their house sale, but it’s important to do your own research. Your location, home, the time you are selling – it will all have an impact on the valuation of your property. Check out recently sold, similar properties on websites such as realestate.com.au or domain.com.au. You can also call a couple of your local real estate agents – most of which can give you a free, no obligation, indication of your properties value.
Be careful about buying and signing a contract for a new home before you’ve sold your old home. You might find it harder to sell than anticipated and need to sell for less than you hoped. Waiting to sell your home before you buy your next one can save you unnecessary stress and uncertainty of having to source finance or a bridging loan (bridging loans are short-term home loans that help cover periods of cash flow shortage).
It’s a big step to move from your family home to a smaller property – and it can be hard to know where to start. Head over to our handy “Choosing your Next Home” guide to take a look at what home might be perfect for you to downsize to.
The information provided is meant as a guide only. Porter Davis recommends that all clients seek independent legal, tax and financial advice. Full T&Cs here
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