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Should you downsize when you retire?

March 31, 2021

Future Sense

Martha Harbell

Older couple sitting on their front porch enjoying a cup of coffee

Many people think about moving to a smaller home when they retire. It makes sense - there’s less space to care for, it frees up some capital, and you may be able to move closer to family. These are all good reasons to downsize.

On the other hand, many people forget to consider that downsizing comes with its own costs, which can lead to both financial and emotional stress. To help decide on the right move, ask yourself these five questions.

1. How much will downsizing cost?

Selling your home and moving to a smaller one can give your finances a boost, from both the money you make from the sale and the lower costs of maintaining a smaller property. There are still costs to consider when you downsize, though. Make sure you sit down and add up all the possible expenses, like:

  • Renovations to make your home more appealing to buyers

  • Realtor commission

  • Title insurance and legal fees

  • Land transfer tax on your new home (the exact amount depends on the province and the purchase price)

  • Moving expenses

  • New furniture for the smaller home

  • Condo fees

  • Storage unit fees for any possessions you want to keep but won’t have room for

2. Will you be able to afford the home you want?

Depending on where you plan to move, your money may not go as far as you’d like. Are you looking for a condo in a highly desirable area? A beachfront cottage? Once you get an estimate on what your current home is worth and consider what it would cost you to move, decide on a reasonable budget for your new home.

Once you have your budget, do some research on recent sales in the area you want to move to and expect that any place you buy may require a few upgrades. Depending on the housing market you’re looking at, you should also consider whether it makes more sense to rent or buy.

3. Are you ready to let go of your home?

There are many financial factors to consider when you downsize, but don’t forget about the emotional ones either. Moving to a smaller place will mean getting rid of many things that you won’t have space for. Do you feel ready to let go of some of your possessions, or do you think you might need to pay for a storage unit so that you can keep your grandparents' dining room table?

Also, you may want to talk through your decision with any family members who have strong sentimental ties to your home. Maybe one of your children has been hoping to buy it from you, for example.

4. How will a new home fit into your retirement lifestyle?

When you picture your retired years, what do you see? If the answer is hosting lots of big family gatherings and expanding your garden, downsizing probably isn’t the best fit. If you want to spend a larger portion of your money on travel, now isn’t the best time to spend a lot on a new home - maybe renting is a better option. If you want to move closer to family, it’s time to start researching how much it would cost to find a new home in the same area.

Spend some time thinking about what you want most out of your retirement years. Then, make a list of must-haves for your new home so you can make specific plans.

5. Do you understand the alternatives to downsizing?

Downsizing isn't the only solution when it comes to managing housing costs in retirement. Here are a few other options to consider:

  • Earn some extra income by renting out a room in your home.

  • Share your home - a family member who needs a place to live could help you maintain your property and take on some of the more physical chores.

  • Look into a reverse mortgage - this is a loan that allows you to access your home equity without selling.

Ask for advice

You don’t have to figure all this out on your own! Our mortgage specialists are experts when it comes to helping you get the most value out of your home. Come talk to us.

Want help with your financial plan?

Our wealth advisors are here to help you sort through all your different financial priorities to create the retirement you want. Start today: Connect with a wealth advisor

Learn more about selling your home

Should you sell or rent your home?
What are the added costs of buying a home?
Finalizing the sale of your home