In this month's newsletter, we will share all you need to know about the Six Essential Things to Consider Before Downsizing your Home.
1. Establish your ‘Why’
Is your ‘why’ to realise some equity that can be added to your retirement savings? Is it for convenience? To move closer to the city or family? Possibly it’s to move out of the city to be closer to the seaside or move to the country or for a combination of reasons?
The act of downsizing would usually imply moving into a home of lesser value too, which may mean there is less exposure to the property market and therefore future potential growth, so it is not a decision to be taken lightly and your ‘why’ should outweigh the simple act of remaining where you are on several levels.
2. Are you moving for economic or emotional reasons?
When you become clear on your ‘why’, you should weigh up if your motivations are economic, emotional or a combination of both. If your motivations are economic, then it’s easier to quantify. What will you get for your current home LESS what will it cost you to replace your current home LESS costs associated to the move = the sum of money you have left to help fund your lifestyle needs. There will of course be emotional considerations still as you are choosing to buy your new home, which you will hopefully happily live in for years to come, however it is easier to process through a financial lens.
3. Cost of replacement asset including Buy & Sell costs
Buying and selling property is one of the most expensive decisions you can make and it is therefore a huge consideration in any decision to turn a property over. As a rule of thumb you should put aside 7% of your home sale value towards buy/sell costs. This includes agent fees, marketing costs, conveyancing costs, stamp duty, transfer and registration fees. Often once cost of replacement is fully considered, the decision to downsize can end up being put off, as if the exercise is intended to realise some equity to bolster retirement savings, the amount lost to replacement costs may impact you being able to achieve all that you want from the process. The new property you’ve bought has also left you with less exposure to future growth too.
Continue reading numbers 4-6 of Six essential things to consider before downsizing your home by clicking on the link below:
Have a wonderful day.
James and the team at Yield