Life often comes with a long list of pre-conceived notions about how things are supposed to be. Going to school, beginning a career, and buying a house are a few milestones that are deeply entrenched in our expectations.
Downsizing after retirement is another longstanding tradition that many people look forward to. Some of these customs exist for great reasons. To a large extent, they are a healthy way of life that brings a sense of joy and purpose. But every once in a while, a maverick idea takes hold that turns common wisdom upside down.
One of these that we’ve heard lately is that downsizing after retirement is actually a terrible idea. This concept seems so backwards that we can’t help but be utterly fascinated! Let’s explore why, when, and whether to downsize in more detail.
Do you want to simplify the downsizing process? We have a guide specifically for retirees and soon-to-be retirees! Download your copy right here.
Benefits of Downsizing in Retirement
We might as well start with what we know. Downsizing your home for retirement does come with some advantages. None of us is getting any younger, and a smaller living space means less cleaning and maintenance.
Not only that, but think of the equity you might have in your family home, especially if you’ve owned it for a few years. Compare that with how much you might pay for a condo or townhouse. The difference could be substantial, and it might make for a comfortable retirement fund. We don’t know anyone who wouldn’t love an extra few dollars every month.
The advantages of downsizing after retirement are why it has become such a popular option in the first place. However, no path is right for everyone, and there could be some unexpected downsides.
Is retirement and downsizing on your mind? The posts below can help you plan your next steps:
- Is Guelph a Nice Place to Retire?
- What Are the Top Condo Buildings in Guelph For Seniors?
- Where to Find Downsizing Help for Seniors
When Downsizing After Retirement Is Something to Avoid
Downsizing typically involves selling your existing home and buying a new one. This means two separate real estate transactions, and one is one too many for some people!
It will get even more harrowing if you plan to take out a mortgage to buy your next home. Not everyone is in a position to purchase in cash, even after selling an existing property. Waiting until after you retire to downsize could very well be a big mistake if you’re hoping to obtain bridge financing or any other type of loan.
The reason is that many lenders require you to have a job before they’ll approve you for a mortgage. Your retirement savings may not be enough, even if you have a flawless credit history. The lender won’t necessarily decline your loan, but you may not get as much financing as you hope for or deserve. We have a saying, “Equity is good. But equity with income is better.”
A pre-qualification is no guarantee that you will get approved for a mortgage once you are no longer working. If you plan to borrow, the time to downsize might be before you retire, not after.
When selling your home to help fund your retirement, you can’t afford less than stellar results. The posts below can help you make the most of your transaction:
- When Is The Best Time To Sell A House?
- What Are the Worst Mistakes When Selling Your House?
- Home Inspections: Friend or Foe When Selling Your Home?
Consider Your Intangible Reasons for Downsizing
First, consider why you want to downsize. Fewer repairs and more disposable income are among the most popular reasons to take this big step. However, there is likely much more to your decision.
Our recent experience shows that we could be on the cusp of a new tradition where people downsize at younger ages than ever before. It makes sense when you really think of it.
A middle-aged couple whose children have left home could still be in peak physical health. Downsizing while young frees up time and money to allow a lifestyle that wasn’t possible before. All of the dreams that were on your “someday” list can become a reality if you plan and time your steps strategically.
If you wait until you’re ready or when society says the time is right, you might not be able to enjoy the retirement lifestyle you had hoped for. Travelling will become more challenging, especially if mobility or your health becomes an issue.
A house that’s too big with extra spare rooms that no one uses may no longer serve your needs and goals. If all that extra space is doing is gathering clutter, why not cash out your equity and move on?
Are you planning to buy a house or condo after selling your family home? The posts below could help you along the way:
Downsizing Your Home Is Personal
Traditions may be a core part of our collective consciousness, but that doesn’t mean you can’t or shouldn’t follow your own path and do what is right in your situation. Downsizing at the wrong time or for the wrong reasons, just because “they” told you so is always a terrible idea!
On the other hand, downsizing when it aligns with your goals is a smart decision. It could be later, it could be soon, or it could be never. Decide together with the love of your family and under the expert guidance of a real estate agent and financial advisor, and then you will know you are on the right path for you.
Do you have questions about whether or how to sell your home? Our top Guelph real estate agents are here to fill in the blanks. Reach out today at info@gowylde.ca or call 519-826-7109 for more information.
