Financial considerations when downsizing
A change is as good as a holiday, and there are few changes as momentous as moving house. You get to start afresh and can even re-invent yourself in this time of new beginnings, in a new neighbourhood with the potential of new friendships.
Yet there are of course costs associated with moving. And while downsizing will likely save you money in the long run, there are financial considerations to be aware of.
The change in the property market
We all know that the cost of housing has risen across the country, particularly in capital cities. So, with your current home, you could be sitting on a goldmine! Then again, you may not get how much you’re hoping for when you sell. It’s advisable to wait until your current home has sold before you buy your next property, so that you know exactly how much money you have to play with for your retirement.
Body corporate fees and stamp duty
You may have to pay for body corporate fees (now called Owners Corporations) if you move into an apartment or unit. Then there’s stamp duty: two words that strike dread into home buyers. However, you may not have to pay it. In Victoria for example, eligible pensioners can receive a once-only exemption or concession from the stamp duty tax if their new house is valued at less than $750,000. You can also have this fee waived if you are a first-time home buyer. There are calculators online (such as on the State Revenue Office of Victoria’s website) that can help you work out if you’re entitled to any concessions.
An incentive where older Australians can transfer $300,000 from their house sale into their superannuation will start in July. But because superannuation (and home equity) aren’t exempt from the pension assets test like the family home is, you should talk to a financial expert to find out how your pension may be impacted by a move.
No one’s arguing downsizing can sometimes be a confronting experience. It needs to be done at a pace you’re comfortable with, and when it is, many people are growing to find that downsizing your home and life is something to look forward to, plan and ultimately enjoy when the time comes.
Our real estate partners, Barry Plant can help you start to look into the downsizing process with no obligation or commitment to sell. If you’re curious about what your home could be worth, submit your application for a FREE, no obligation market appraisal.
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Furnishing your new home
When it comes to furnishing your new home (the most fun part!), will you be bringing your old furniture or buying new pieces? Depending on what you decide to do, budget for the moving costs or your shopping bill. To offload any furniture which won’t fit in your new home or which you no longer want, hold a garage sale or list them on Gumtree or Ebay to get some extra money. If you’re more time-poor, donate them to an op-shop instead.
A smaller house can end up costing you a lot less, as there is less space to furnish, clean and heat/cool. This can be an impetus to curb your spending if you do go a bit overboard shopping, as you won’t have as much room to store your purchases. You’ll be able to jump onboard the minimalist trend with minimal effort!
Depending on where you move to, factor in the costs of travelling to visit family and friends. How much will public transport or petrol be? Many downsizers opt to shift closer to their loved ones though, in which case you could end up saving money.
Taking these factors into consideration will prepare and empower you to make the best decision for your next exciting stage.
Head to the toolbox for more downsizing articles.
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