Even if you still love your house with its beautiful 5-bedroom and huge garden, it may become too much to maintain after a while. Some of the rooms may be empty because they are too difficult to get to, or the stairs may seem impossible to climb.
Downsizing may be desirable to get a more affordable home loan when this happens. Don’t see it as a “downgrade” from a large house to a smaller one; see it instead as a new chapter in the book that is your life. You’ll need to make a blueprint or draft first, though—one you can use to move forward as smoothly as possible.
But before you downsize, do your research. It’s not as easy as buying the smallest, cheapest house you can find. Here are five things you need to know before downsizing your home:
Downsizing Costs Cash
Moving to a smaller home won't be cheaper. You'll need to consider the following:
Other inspection fees
Are you sure you have enough cash to cover the costs and gain a more affordable home loan? Consult with a financial adviser before deciding about downsizing. Also, research the local real estate market, then take an appraisal to estimate the value of your home. Consider this amount—enough to sustain you through downsizing?
For sure, it's hard to say goodbye to your old home. However, this can be mitigated by acknowledging old memories and feeling attached to them doesn't mean it's better to hold on to useless things. If you’re thinking of downsizing your home, keep in mind it could enable you to have a better lifestyle.
Downsizing May Equal Low-Maintenance Living
Moving to a smaller home means changing how you organise your life and clean by doing different tasks. You should consider these changes before deciding on a new house.
Digitise your photos and music from CDs to save more space. You may also reduce the number of things you have by selling or donating items that aren’t useful for your new home. Moving may increase your energy bill because of moving costs, but you may have lower operating costs when renting or owning a smaller home.
When you move into your new house, get rid of stuff you haven’t used in five years. Consider selling or donating your unwanted objects to raise money. Selling your old home can also create a financial benefit protected from the assets test. The assets test is one of the two tests used to determine eligibility for the age pension or government benefits.
Moneysmart says the proceeds from selling your current home are “deemed” as income under the income test. The income test examines your profits as income produced through financial assets and may affect your government benefits.
Downsizing Takes Planning
There are several factors to consider when it comes to downsizing—it’s not a simple decision. Ask yourself why you want to downsize:
Is it because you’re retiring in the coming years?
Do you want a smaller home and a more affordable home loan because of a lifestyle change or a career move?
Are these questions helpful to your buying journey?
You Can Downsize through a Scheme
According to the Australian Taxation Office (ATO), downsizers can put $300,000 of their home sale proceeds into super. It won't count towards the $1.6M cap.
Get Your Affordable Home Loan from Wealthy You Now
As we close, consider that downsizing isn’t the only option you have left for refinancing a home loan. However, downsizing has gained popularity over the years, half of those over 55-years-olds open to the possibility of moving to a smaller home. If you prefer living closer to your loved ones, consider a granny flat, a secondary dwelling on a property. It can be built into the main house or a separate structure.
Downsizing isn’t the end of your home life. It can be a beautiful beginning. So if you’re set on downgrading your lifestyle, speak to Wealthy You for affordable home loans! We can offer you various alternative mortgage solutions to meet your specific financial needs and make home refinancing simple as pie. Get started with us right away!