Most likely your home is your biggest asset. It’s also your biggest expense. Unfortunately when it comes to retirement planning, the family home is often last on the list of later in life changes.
There are many reasons for this delay. Emotionally it’s difficult to let go of a home filled with memories. Moving can be a big process. And downsizing to a smaller home or condo may not produce a substantial cash windfall. For these reasons, many retirees delay for years moving into a smaller house, condo or apartment.
However in many cases the benefits of downsizing sooner rather than later can be significant.
The financial benefits may seem small initially but in the long term they can extend the life of your retirement savings. You may have a hesitation to sell a mortgage free house and move to an apartment with a monthly rent payment. However with a home many of the expenses are hidden. It’s the ongoing maintenance such as: roof, furnace, windows, grass cutting and landscaping, snow removal etc. Not to mention the annual costs of heat, electricity and taxes on a large older home. These costs add up to a substantial amount.
Selling your home will eliminate any mortgage or other debt and reduce your monthly expenses. Add in the income you will earn from investing the equity of your home and the savings from no home maintenance. Compare that to the monthly rental payment of an apartment.
In many cases retirees are financially better off by renting. If downsizing makes sense, don’t wait. Sometimes people have a hesitation to downsize because they like to keep the family home so when children and grandchildren visit they can stay in the family home. You should carefully consider the cost of this decision. It’s cheaper to pay for a hotel for the relatives than cling to the family home and all its associated costs (taxes, maintenance, heat etc).
Trading the variable and hidden costs of home ownership for the visible cost of a condo or apartment can help with planning and budgeting. You know what your fixed costs will be.
Even without a mortgage, housing will often account for 30% of retirement expenses. Let’s look at the math in this example. You sell your $300,000 home and move to an apartment that rents for $1500 per month. We’ll allow for 10% of the selling price to cover all moving related expenses. This leaves $270,000 to be invested. That $270,000 could produce an additional $16,200 of income per year. On top of that the savings from lower housing expenses could easily be $3000 per year. A total of $19,200 additional income to pay $18,000 in total annual rent.
Besides the financial benefits, is simply the practicality. Many people fail to consider how the aging process makes it harder to move. The process is exhausting at a young age. It’s much more daunting for retirees. As we age, illness or death can unexpectedly force a move upon you. Situations like this create stress and havoc for the entire family. In many cases the bulk of the
responsibility falls upon the children. Making the move before one spouse dies can help prevent the surviving spouse or your adult children from having to empty and sell a big house.
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Looking to sell your home? Give me a call today. When you are buying or selling a home, don’t waste time. Give me a call for experience, market knowledge, correct pricing, and a sincere interest in helping you fulfill your real estate goals. If you are ready to sell your home for maximum value, the best place to start is by clicking here and scheduling an appointment.
Roy Thomas SRES is a Senior’s Real Estate Specialist and a REALTOR® with Sutton Group-Professional Realty. Licensed since 1991, much of Roy’s practice is helping retirees with their later in life moves. Roy can be reached at 902-497-3031, by email: RoyThomas@RoyThomas.ca or read other articles online at www.HalifaxSeniorLiving.ca
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|Roy Thomas SRES® (Senior’s Real Estate Specialist) is a REALTOR® with Sutton Group Professional Realty. Since 1991 Roy specializes in helping retirees with their later in life real estate transactions. If you are contemplating a move and would like a complimentary copy of Roy’s guide to downsizing entitled “Preparing to Downsize” please click here|