There are a lot of perks to downsizing. One of the most compelling of these perks is the financial freedom it can provide.
That said, if you don’t plan (and execute) your transition carefully, you could miss out on big savings. Or, in some cases, you could even find yourself in the red.
As a real estate agent who specializes in helping clients in their golden years, I’ve got a few tips to help you accomplish an easy, and financially beneficial downsizing process.
Managing Expenses as a Downsizer
Transitioning to a smaller home goes deeper than saving a few bucks here and there. In fact, the downsizing process is usually a big part of my clients’ overall financial plan for retirement. Housing costs aren’t cheap – especially in the Greater Toronto Area. When you’re on a fixed income as a retiree, it’s extra important to be diligent in managing your everyday expenses.
When you make the move to a smaller home, it’s not just the size of your living quarters that shrinks. Speaking generally, most of your housing costs will also downsize when you make the move. Some of these savings will be instantly noticeable, while others, although small, will add up in the long run.
A Smaller Mortgage
One of the most substantial financial benefits of downsizing is lowering your monthly mortgage or housing costs.
Moving to a smaller, less expensive home usually means managing a smaller, less expensive mortgage. As a result, your monthly housing expenses – i.e. your mortgage, will be reduced, potentially quite significantly.
On top of the savings that come with smaller ongoing costs, moving to a lower-cost property also means you pocket more of the equity you’ve built in your current home. If you’ve been in the same place for a long time, there’s a good chance it’s worth a lot more than when you bought it. Leveraging this equity, you could have a nice surplus to cushion your savings for the years ahead.
Co-op Housing For Downsizers
If you’re looking ahead to where you’ll live next – why not consider co-op living? Despite being the most cost-effective housing option for seniors and retirees, most downsizers have never even considered buying a co-op property, and some haven’t even heard of co-op homes at all!
Co-ops work like condos, but slightly differently. In a housing co-op, you own shares in the corporation but have exclusive use of your unit. Because fewer banks will mortgage these properties, they don’t appreciate as much as condos – keeping buying costs comparatively low.
Another feature of co-ops that might be attractive to buyers on a fixed income is that the maintenance fees are usually a bundled combination of maintenance, property taxes, and some utilities. Many properties will also include amenities like cable. This means fewer bills to track and pay. While co-ops don’t usually have the amenities that newer condos have, it also means that the maintenance fees are lower and more predictable.
Dreaming of downsizing your home? Check out these related blogs for more advice!
- 5 Tips For Downsizing Your East GTA Home
- I Want to Sell My Home But I Have Too Much Stuff
- Should You Hire a Senior Real Estate Specialist?
Downsizers Have Lesser Property Taxes & Insurance Premiums
When it comes to the ways downsizing can help you cut back on housing costs, a smaller mortgage is only the beginning. Downsizing to a smaller or less expensive property can reduce your annual property tax bill, which can quickly add up to substantial savings over the years.
Property taxes are generally calculated based on your home’s assessed value. So, while your current place may come with high property taxes, your next home’s reduced market value means your annual property tax bill won’t take such a large bite out of your wallet.
The same thing goes for your insurance. Homeowners’ insurance premiums are partially based on the value and size of your property. So, by moving to a smaller, lower-value home, your insurance premiums may decrease too – adding another angle of savings.
Cut Back on Utilities
Another way downsizing helps you save money? Cutting back on utilities without even thinking about it. Older, larger homes often lack modern technology that many newer, smaller homes include, like better insulation, energy-efficient windows, and updated appliances. However, a smaller home with fewer rooms and a smaller footprint is generally more energy-saving and will cost less in utilities.
Hoping to downsize soon? Explore these related blogs for more advice!
- Should I Buy a Home or Sell First as a Downsizer?
- 5 Signs It’s Finally Time To Downsize
- Is Scarborough Good For Seniors?
Savings From Lifestyle Changes
Finally, some of the ways downsizing can help you save money aren’t directly attached to your home.
For instance, downsizing comes with the need to pare down belongings (aka decluttering), a process that can encourage a streamlined lifestyle focused on experiences rather than possessions. With that in mind, this shift in focus can help you resist the urge to accumulate things you don’t need, which can contribute to savings in the long run.
Looking for a Senior Real Estate Specialist to guide your downsize? I can help! Call 647.283.2127 or email me at stuart@stuartnodell.com to get in touch.
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