Downsizing is simply the process of selling your home to purchase one that is smaller and more suited to your current lifestyle needs.
The reasons people choose to downsize vary depending on the property they are currently living in. This can range from wanting to leave a double story home, to wanting less rooms to clean all the way through having a lock and go arrangement as they plan on doing a lot more travelling. Others choose to downsize to free up equity, pay off debt or improve their cash flow. Whatever your reason for wanting to downsize there are some things you should consider along the way.
Downsizing doesn’t have to mean downgrading
For a lot of people, the idea of downsizing may be associated with downgrading, but this doesn’t have to be the case. Obtaining a smaller, modern or architecturally designed property may be the goal here. Something that is going to be a good quality investment over the long term and a joy to live in.
Or it could be something you choose to build yourself, an established property in an area with excellent lifestyle features or an apartment you can safely leave to go and travel for a good chunk of the year.
You don’t have to think of it as selling up to move into a retirement community in a poky little prefab, although for some people there are substantial benefits to doing this too with close community and support on hand if they need it.
Have a checklist of non-negotiables
Just like when you were purchasing your family home originally, you will have a list of requirements in your new property that are non-negotiable. This could include things like:
- Smaller land size
- Low maintenance garden
- Less rooms
- Single story for ease of access
- Close to family or medical facilities
Whatever it is you want in your next home, ensure you have your non-negotiables sorted in advance, it will help with the house-hunting.
Consider your finances
Ideally when it comes time to downsize, you’ll be in a position where you won’t need to apply for a new home loan to complete the purchase. But not everyone is in this position, so it’s a good idea to chat with a finance broker if you don’t think you can buy your next property with cash.
There are buying and selling costs to consider too which include stamp duty, legal fees, moving costs and inspection fees.
Buy first or sell first?
If you are relying on the cash from the sale of your current property to purchase the next, then it’s a good idea to sell first. Buying first can mean you set yourself an unrealistic or bottom-line price you need to achieve when selling your current property. This puts unnecessary pressure on you which can be avoided by selling first so you know what your budget is upfront.
Should you not require funds from the sale, then it’s really up to you whether you buy or sell first and what is going to best suit your cashflow position.
Get ready to declutter
This is a big one. If you are downsizing from a much larger property you are going to have excess furniture and ‘stuff’ that you’re going to need to sort through. This might be a challenge for some. If you’ve been accruing these items over a long period of time it can be difficult to part with things you have a sentimental attachment to. Which is completely normal!
Once you’ve found your new property, it’s a good idea to decide what to keep and what to donate or sell ahead of your moving day. Reviewing the floorplan to understand what space you have, what furniture and items are going to fit and what’s not going to work in your new home.
You might find instead that you prefer to donate or sell all of your furniture and purchase it new for your new home. If your current Victorian-era chaise won’t suit your new coastal chic beach house, then you’ve got an opportunity to make new memories with new things.
Is a granny flat an option?
Post-COVID, a trend in multigenerational living is re-emerging. This could mean downsizing actually means moving to live on the same property as your kids and grandkids in a granny flat, retreat or self-contained suites.
For lots of people this is an increasingly attractive option. Not only does it make a lot of financial sense for all parties, but having closer connection to family has been shown to have many health and psychological benefits for everyone.