Should you Downsize or Sell Your Canadian Home When You Retire?
Retirement is often touted as the Golden Years – a time to step back from the frenzy of a career and spend time with your loved ones. Gardening, travelling, knitting or even bowling – retirement is the time to enjoy it all. It paints a rosy picture, doesn’t it?
As always, when we compare life and dreams, reality lies somewhere in between. If you have enough funds to support your health and lifestyle post-retirement, it can be blissful. However, this is not always the case.
Given inflation, rising living costs, and increased longevity, many Canadian retirees who own their homes are considering selling or downsizing.
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Should You Sell Your Semi-Detached Home in Brampton?
It is not an easy decision, and the consequences can be more complex than they initially appear.
While letting go of the responsibilities of homeownership may seem appealing, several financial, logistical, and emotional factors must be taken into account. This article helps you sort out the factors and make the decision that is best for your circumstances and needs.
Financial Considerations
Downsizing your home may seem like a simple way to unlock home equity and reduce maintenance and other expenses.
However, hidden costs such as transaction fees, legal fees, moving expenses, renovations, and monthly fees for a new property can quickly add up, eroding the anticipated savings. Do not forget the added hassle of getting a new mortgage if you decide to get one.
You may also need to invest in age-appropriate renovations to your new home before moving in, such as anti-slip flooring and improved security. All of this can add up to a pretty high sum.
Finding a cheaper home in the same or similar neighbourhood can prove challenging if you live in an urban center. Canadian real estate markets are very competitive, and retaining much profit after downsizing may be difficult.
Logistical Challenges
There are practical aspects of downsizing which can take up your time.
The sheer logistics of moving, coupled with the challenge of adapting to a new living environment, can make staying put in one’s current home more appealing.
Incidentally, studies have shown that most Canadians tend to downsize into apartments only when they reach the age of 85 or older. This may be due to the increasing difficulty in finding smaller homes that meet their needs for accessibility and convenience as they age.
Emotional Attachment to the Home
For many elders, their home is not just a physical structure but a tangible symbol of their life, a familiar comfort zone filled with memories.
Deciding which possessions to keep, sell, or donate can be difficult, especially for those who have accumulated a lifetime’s worth of belongings. Moreover, the emotional cost of leaving behind a beloved family home, local community ties, and a sense of belonging can go against downsizing.
Many people experience stress and upheaval when moving, which further reinforces their desire to remain in the familiar surroundings of one’s current residence.
The Importance of Support Systems
The support systems that seniors have built, such as a network of family, friends, and healthcare facilities, are the basis for their overall quality of life and emotional well-being.
Many retirees may not wish to forge new relationships at their age. The potential for isolation and the challenge of building a new life in a different location may make them resigned to staying in their current home.
Studies have shown that many Canadian seniors view their current residence as the place they want to live in, even after retirement. This is because they place a priority on the familiarity and comfort of their established support networks.
Aging in Place: A Feasible Option
Do you really need to shift?
Advancements in home technology and the availability of in-home care services have made “aging in place” a more viable option. Simple home modifications can improve safety and accessibility, allowing people to live independently in their homes for longer periods.
The comfort and autonomy that come with remaining in a familiar environment can outweigh the perceived benefits of downsizing. Seniors can put their personal preferences, circumstances, and care needs first without too many changes.
Reverse Mortgages: Unlocking Home Equity
For Canadian homeowners (ages 55 and above), a reverse mortgage will help them access the equity in their homes without the need to downsize or sell. Though interest rates on reverse mortgages are generally higher, loan repayment is only required when the homeowner moves, sells the property or passes away.
A reverse mortgage is designed to help homeowners unlock the equity in their homes. To qualify for a reverse mortgage, any existing home loans must be paid off. Once qualified, homeowners can receive the proceeds as a lump sum, regular monthly payments, or a combination of both. Use a reverse mortgage payment calculator to mortgage payment calculator to see how different options might work for you
The best advantage of a reverse mortgage is that the money is not subject to income tax. Therefore, it does not impact benefits like Old Age Security (OAS) or Guaranteed Income Supplement (GIS).
Reverse mortgages are particularly beneficial for older homeowners who have home equity but inadequate income from pensions, retirement funds, or salaries. They can be an ideal solution for those who are “house-rich but cash-poor.”
Weigh the Pros and Cons
The decision to stay in your current home after retirement is personal and depends on various factors. Consult financial advisors, family members, and healthcare professionals to help you make informed choices.
Ultimately, the choice should be based on a comprehensive assessment of individual preferences, financial situation, and long-term goals.
Exploring Downsizing Options
For those who do decide to downsize, there are several options to consider. We list out the advantages and drawbacks.
Relocating to an Area with a Lower Cost of Living
If retirees are not firmly attached to their current neighbourhood or city, moving to another location with a lower cost of living can be a way to save money when downsizing.
By researching housing prices in different markets, they can find a smaller home that better fits their budget while still meeting their lifestyle needs.
Retirement Communities
Retirement communities designed for seniors aged 55 and above offer a range of housing options, including bungalows, townhouses, and apartments.
These communities often provide amenities, activities, and services tailored to the older population’s needs, fostering a sense of community, safety and belonging.
Condominium Living
Condos can be another viable option, as they typically require less maintenance and upkeep compared to a detached home in Mississauga.
The convenience of living in a condo, including not having to worry about upkeep or maintenance tasks like snow removal or lawn care, is a definite plus point.
However, consider the monthly condo fees carefully and ensure the building offers the desired amenities before signing the papers.
If you want to see whether this lifestyle suits you, try renting a condo in Brampton for a while. If you like it, you can look for one to buy. Alternatively, you can sell your home and switch to renting permanently, investing the proceeds to generate a steady income.
This way, you can avoid the responsibilities and costs of individual homeownership while improving your financial situation.
Stay, Sell or Shift?
Retirees in Canada typically have multiple income sources, including employment-based pension plans, personal retirement savings like RRSPs and TFSAs, and publicly administered pension plans such as CPP, OAS, GIS, and GAINS. So, if you are comfortably placed, you may not need to make this decision at all.
However, whether to downsize or stay in your current home – this choice requires you to take a closer look at your finances and lifestyle. Downsizing can reduce expenses and simplify living, but it comes with its own challenges.
Like always, weigh the pros and cons, look at alternatives like reverse mortgages, and seek professional guidance. Whether you choose to downsize or age in your home, the decision should be tailored to your unique circumstances and aspirations.
If you decide to sell your home, Save Max has a special offer for Brampton residents: list your house for $999. The team can also assist with buying or selling properties across Canada.
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