Let’s explore some of the benefits of downsizing – from cutting back on maintenance and energy costs, to having more money in your pocket to invest for retirement and that lifestyle you’ve been looking for!
Remember, when you are ready, make sure you get some professional advice to get the best from your property decisions. Think about the following to help guide you into a downsizing mode.
1. More funds to invest to create security in retirement or improve your lifestyle.
Downsizing allows you to unlock the equity in your current home to use for investment purposes.
If you are lucky, you may be at a point where you’ll be able to pay for your new home with cash, then use any leftover funds to expand your property portfolio and start generating income from an investment property.
You could also use the money on a new car, travelling or other lifestyle pursuits.
2. Fewer expenses.
Downsizing can drastically reduce your expenses, from cutting your mortgage repayments to slashing your living costs. Energy is one area where you are likely to notice real savings when you move to a smaller property.
Shire rates will be lower and the maintenance of a new smaller property will be less significant when compared to the large family home you are likely leaving behind.
Let’s face it – bigger properties can be hard work.
Not everyone wants to spend their life maintaining a larger property or garden. Just think of what you could do with the time it takes to clean and maintain that great big house.
More time for the family, for yourself and even just time to relax and do nothing!
3. Lifestyle benefits.
Looking for a sea change or a tree change? Downsizing could provide a great opportunity for you to live in a more desirable location, like beachside or countryside but most importantly in housing that is more suitable for your needs.
There are many great locations to consider – from the coast to the country, you can find great value properties in communities where you can indulge your personal interests.
Sailing, hiking, exciting adventures in your caravan – you name it! If you’re ready to retire, an empty-nester, or are recently single, downsizing could be the fantastic step you’ll wish you had taken long ago but hadn’t had the right advice to help you through it.
Look no further help is out there to de-stress the process and get you into a new or renovated home as smoothly and quickly as possible.
4. Tax breaks.
In a recent Federal Budget, the Government announced plans to encourage older property owners to downsize. This is intended to help free up larger homes for younger, growing families. Retirees are able to inject substantial sums into superannuation if they sell their home after they reach the age of 65.
The existing voluntary contribution rules for people aged 65 and older (work test for 65-74-year-olds, no contributions for those aged 75 and over) and restrictions on non-concessional contributions for people with balances above the lifetime limit do not apply to contributions made under the downsizing cap.
To qualify, you must have owned your property for 10 years. What’s great about this new initiative is that both members of a couple can take advantage of the measure for the same home. That’s double the current allowance for a couple downsizing to a new home.
However, keep in mind that the proceeds contributed to superannuation will be included in the assets test for any age pension qualification.
While it’s tempting to hold onto the family home because of the sentimental value, the reality is that it may be holding you back from a better lifestyle and a more comfortable financial situation. Downsizing could allow you to find a home that’s more appropriate to your lifestyle, while also freeing up time and money to use elsewhere.
There are experts to advise you on the financial aspects of restructuring your home loans and other finances and most good ones will actively advise you to take a free review with them before committing.
WRITTEN BY PAUL CHEVERALL