The Advantages and Disadvantages of Downsizing
There are many reasons why you might want to downsize. Whether it be because of retirement, the kids moving out or a simple change in scenery, downsizing is a significant move. There are always conflicting thoughts that arise when making big financial decisions – and downsizing might also mean cutting emotional ties with your family home.
That’s why it’s best to weigh the pros and cons of downsizing before you make a final decision. With potential benefits and losses, it’s helpful to speak to a professional who can help guide you to making the right choice for your finances.
• Increased cash flow
By spending less on mortgage repayments, or paying cash for a smaller property out of the proceeds from the sale of an existing property, you are more likely to have more money to allocate to other things.
• Lower utility bills
Smaller houses potentially cost less to upkeep. It doesn’t take much for a smaller home to heat or cool and, with the lower running time of the heater or air conditioner, the environment will benefit from your reduced energy usage too.
• Less time spent on household chores and maintenance
With fewer rooms, smaller spaces and limited garden space, the time taken to clean and maintain your home becomes a lot less. You’ll have more time to relax and enjoy yourself.
• Minimised stress
With less responsibility, smaller workloads, increased cash flow and greater flexibility, living in a smaller house can reduce a homeowner’s stress, which can be liberating.
• Less temptation to accumulate unnecessary items
With a smaller space, you’ll need to be conscious of what you keep and what you throw away. When buying things, you’ll be restricted for space – meaning you’ll have less temptation to splurge on things you will never need.
• Buying and selling costs
Before you downsize, you’ll need to think about all the associated costs that buying and selling a home entails. You’ll need to consider agent fees, marketing costs, legal costs, loan exit fees and stamp duty. Downsizing doesn’t automatically save you money, so you need to be aware of exactly the kind of costs you’ll be facing.
• Parting with possessions may not be easy
Apart from the fact you might find it hard to part with possessions you have become attached to, your furniture may need to be replaced if they don’t fit inside the space of a smaller home.
• Change is hard
Downsizing to a smaller home may call for a lifestyle change. This might mean a change in your level of comfort, having a restricted space when hosting family or friends may become a struggle, or coming to terms with moving out of the family home. Change can be tough for some people, but taking a risk can sometimes be the most rewarding experience.
As always, it’s best to seek professional advice when making big financial decisions that you’re not quite sure about. A mortgage broker can offer you great home loan advice and provide a support system when going through the process of buying or selling.
At Select, we offer no-obligation, quality and free home loan advice to help you reach your financial goals. Give us a call on (08) 9417 3399 to talk to us about your home loan options and whether downsizing is the right choice for your situation.