Are you thinking about downsizing? Australian Bureau of Statistics (ABS) data suggests two-thirds of retirees are living in a dwelling with at least one spare bedroom.
According to the Australian Housing and Urban Research Institute, 30% of 55-64s and 65-74s respectively have thought about it – 20% of 55-64s and 30% of 65-74s have already done it. If you’re an empty nester and maintenance is becoming more of a chore than ever before, moving to a smaller place may be the answer.
Though you may have paid off your home many years ago, if you choose to move to a popular retirement destination, overseas, or somewhere more expensive, you will need to reliably compare home loans – more on that later.
What is Downsizing?
Downsizing is leaving your family home which is an “empty nest” for a smaller home, usually in a more desirable location – perhaps your “dream” retirement location. Other options include “rightsizing” which means swapping your home for a luxury apartment, condo, or villa that may be serviced – which may carry an extra cost but means you’ll be living your days in comfort. According to the AHURI, reasons for downsizing included for a better or alternate lifestyle (27%), financial (27%) reasons; followed by the garden or property requiring too much maintenance (18%).
Incentives to Downsize
The Federal Government has introduced incentives for retirees to downsize. In this Financial Year (2021-22) people over 60 will be able to make a one-off, post-tax contribution of up to $300,000 per person (or $600,000 per couple) to their super when they sell their home, which is mostly exempt from caps on super contributions.
Though some may be apprehensive about moving away from a cherished neighbourhood, most report the experience as positive. The AHURI report showed that retirees experienced a reduction in time maintaining their property (55%) and reduced maintenance costs (48%). Many also reported reduced housing costs (42%), a better location (40%), and feeling safer and more secure (36%).
Do You Need Home Finance?
Depending on where you choose to live, you may need to finance a portion of your new property, especially if there is a shortfall between your property’s sale proceeds and the price of the new property. Though you may feel like your bank is the first port of call for a home loan, Bill Tsouvalas says that seeking advice from a broker may save you in the long run. “A broker who can find you many different loans from all sorts of lenders and banks so you can make a reliable comparison.”
Tsouvalas also says to look for comparison rates instead of bare interest rates, as comparison rates include most fees and charges associated with the loan expressed as a percentage.
“Remember to consult a financial adviser to see if home finance is right – get as much advice as you can before looking at homes and finding finance.”