Downsizing Done Right
Downsizing done right or not is, without question, an emotional decision but there are steps you can take to make the transition easier, from start to finish.
Be honest about why you want to downsize.
Downsizing your large house for a smaller one, more suitable for long term retirement plans doesn’t necessarily mean you’ll realize a huge profit. You can adapt your new home to accommodate health concerns that may arise as you age – wider hallways for wheelchairs, single level home versus two levels, but that doesn’t always leave large amounts of money in your pocket. Be sure you’re totally comfortable with your decision and understand why you’re doing it, whether it’s for financial or practical reasons.
Assess your true needs.
Take a serious look at how you live your daily life and prioritize activities and items that are a part of your everyday routine. Are there health concerns which dictate things you need in your home? Don’t plan your new home based on activities you don’t do yet, but rather on what you do take part in regularly.
Decide where you want to live.
A small town with a slower pace doesn’t appeal to everyone. Maybe you prefer a big city with all the amenities. If you’re considering a move to a new area or city, try it out for a while first by renting a home. You can decide if you want to make the move permanent before making a huge financial commitment.
Smaller isn’t always cheaper.
Smaller towns may be cheaper than the big city, but other factors come into play here as well. Do you have to have a car because there’s no public transportation, or can you live in an urban area and get rid of your car? Detached homes tend to cost more than condos, but condos also come with maintenance fees which can escalate quickly if a major repair or replacement is needed at the complex.
Price it out first.
To make sure you have realistic expectations about your finances, sit down and figure out all of the costs associated with moving. Real estate commissions, costs of moving from the old house to the new one, property transfer tax, condo fees, legal fees and more, will all come out of your profits. On the surface you may think one thing, only to find out the reality is much less. Understanding these figures beforehand will eliminate the shock after the fact.
Draw up a plan.
If you have a financial advisor, ask them for a simple plan outlining different scenarios so you can be sure you have enough to meet your retirement goals. Your original plan may need to be modified so keep an open mind for new ideas. If you’re selling in a hot market, do you want to consider renting until prices cool off so you can buy your new home when the market is more in the buyers favor?
Whatever reason you have for downsizing, make sure you have realistic goals, you’re emotionally ready and you understand any pitfalls.
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