Consider your financial situation when downsizing

Stock image.
Stock image.

LIFESTYLE factors play a large role when many retirees and empty-nesters decide to downsize but Resolve Finance managing director Don Crellin said there were also financial implications to be considered.

“While you loved your large property when you had kids at home, ongoing cleaning and property maintenance can be time consuming and frustrating – especially for those with health or physical restrictions – and a smaller home, villa or unit can become an attractive proposition,” he said.

“There has been a great deal of commentary in regards to downsizing, creating an opportunity to top up your retirement savings.

“In fact, there have been recent changes introduced by the Federal Government to support this initiative which has been available since July 1, 2018 and these may be worth investigating.”

Don Crellin.

Mr Crellin offered the following tips for people considering downsizing.

Look before you leap

Seek professional advice – don’t overlook the need to discuss your plans with a trusted financial adviser.

This is particularly important to ensure you are fully aware of the financial implications that may be incurred well beyond the immediate downsizing transaction.

Leave yourself plenty of time to look at your real estate options and suburbs of interest, then only purchase when you are confident.

People have differing risk appetites and personal situations such as the value of their current home, purchase price of the new home, any loans outstanding and their income position for example.

There are both positives and negatives of selling before buying, versus purchasing prior to the sale of the existing property.

It’s important that you spend the time with a reputable mortgage broker to understand the ins and outs of each option.

Be practical

Look beyond the look and feel of a home and focus on the financial considerations.

Seeking the expertise of a financial adviser can offer a fresh pair of eyes across your situation and assist with making sense of the small print.

They can also calculate the impact your move may have on any social security or tax entitlements you might be eligible for now or in future.

Size up your current site

Is your block subdivisible?

Check with your local zoning by-laws about a demolish, divide and build project, retaining a portion of your current block to build on and selling the rest.

Working with your main financial asset rather than offloading it entirely may even yield a little nest egg when the process is over.

Selling part of your land can fund a new home with a ‘future-proof’ design.

Any number of builders cater to this exact downsizer market with single-storey home designs, which can be customised to suit the owner’s needs.

The builder can incorporate any physical features or adjustments you feel may aid your future mobility, safety and retirement lifestyle needs.