The word ‘downsizing’ is an American term which originated in the corporate world.
It now also refers to the process of moving to a smaller or lower-maintenance home and usually also means simplifying your lifestyle. Many downsizers are older or retired people who no longer need a large home
However, downsizing is not necessarily just for retirees – it suits anyone seeking a change in lifestyle.
It is also a way to minimise the upkeep of a home and reduce the associated maintenance costs.
Is downsizing right for you? Let’s look at the pros and cons.
More Money in the Bank
You may be financially better off – especially if you have owned your current home for a while and it has increased in value.
Downsizing may allow you to pay off your mortgage and move to a smaller, more modern property with better appliances and facilities.
Older people with mobility issues can choose to live in a home without stairs, a smaller garden and fewer rooms to clean.
Smaller homes may also mean lower energy bills.
A new lease on life
Moving to a new area can be exciting and invigorating at any stage of life. A new home can mean improved mental health, new opportunities for work, hobbies and friendships, and can mean a new chapter of life begins, potentially with more financial security. Downsizing can mean staying in your own home longer, and all the associated benefits that this entails.
A chance to declutter
If you are surrounded by decades of clutter and belongings, downsizing can be the perfect opportunity to clear, clean and declutter, keeping only the essentials and donating unwanted items to charity, discarding junk and keeping only the items that are the most valuable.
Too much of a change
You may find it difficult to contemplate living somewhere different or adjust to a big change if you move from a large house to a small apartment. If you are leaving a home with a lifetime of memories, this may also be a wrench and too emotional for some.
Minimal Financial Benefit
If you are downsizing but want to stay in the same area to be close to family and friends, you may find that the financial benefits are minimal.
It may be overwhelming to consider the task of decluttering and deciding what to do with the accumulated belongings of decades.
Questions to Ask Before You Consider Downsizing
If you’re not sure whether it’s the right time to downsize, asking the following questions may help the decision-making process.
How do you entertain/currently use your home?
If you have a large family and circle of friends, or do a lot of entertaining, consider the impacts on your lifestyle of moving to a smaller home. Downsizing may mean scaling back large gatherings and seeing less of your loved ones.
How important is your outdoor space/garden?
If gardening is one of your hobbies, then consider a downsize carefully. Units and apartments can be short on space for plants and flowers. (The upside is you may never have to mow another lawn!)
What kind of lifestyle do you want after you downsize?
Are you downsizing to move closer to friends and family, live closer to public transport, a city hub or a regional or beach community? Different options for housing will be available depending on where you move. Cost will also be a factor.
The Australian government allows eligible Australians to use a portion of their home sale proceeds – up to $300,000 – to boost their super. This is treated as a non-concessional contribution and doesn’t count towards the annual superannuation contribution cap.
In addition, the proceeds of your home sale are exempt from the age pension asset test for up to 12 months if you plan to use the money to purchase, construct, or renovate another home.
However, the proceeds from your home sale are deemed as part of the age pension income test, according to Moneysmart. The income test examines your proceeds as income from financial assets, which may affect government benefits.
For more information about the age pension and government benefits, visit Moneysmart.
If you have decided to sell your home, and have done renovations in the last 6.5 years, you will need an Owner Builder Defects (137b) Report as part of your Section 32 documentation.
Book a Home Inspection Hub Owner Builder Defects Report if you have constructed, renovated, altered, extended, improved or repaired a home or have taken out a permit but had a builder undertake the work.
Downsizing to an apartment? A pre-purchase inspection is essential to check the condition of both new and established apartments.
With over 20,000 inspections under our belt and an established reputation, The Home Inspection Hub provides peace of mind for anyone who is buying, selling, renovating, building, investing or downsizing.
Call us today on 1300 071 283 or email firstname.lastname@example.org and see how we can assist you in your property journey.