When looking at where to spend their retirement years, many Canadian seniors look at the option of moving to a smaller home, especially if most of their cash is tied up in their house. While this is a valid option, it is expensive and not one you want to look at for anything else but lifestyle considerations – and even those can be overcome in your current home.
Downsizing can be a large short-term hit to retirement funds
The average cost of moving, legal, land transfer taxes and other associated costs can add up to around $40,000 for someone selling a $400,000 home, according to John Cavan, an industry expert with Mortgage Architects. These are all short-term costs due when your home is sold, so any extra cash you may have banked on from the sale of the home may not be as big of a chunk as you thought. The only potential long-term savings are with property taxes, which are roughly the same for a $250,000 property as they are for a $400,000 property. And condos aren’t the answer; condominium fees are a monthly cost that most retirees don’t want to figure into their retirement spending.
Lifestyle changes can be made in your current home
If you are concerned about climbing stairs, space to clean, and other usual lifestyle issues, renovating or setting aside funds to purchase equipment to help you climb stairs later in your retirement easily remedies them. If cleaning is a concern, you can set aside funds for a home cleaning service to help you shoulder the load in your later retirement years as well. All of this will cost you much less than downsizing.
Most Canadian seniors want to age in place
It took a long time to get your home to where you have it right now. Painting, renovating and additions have already been done, and you are probably happy with where it is and used to it. Part of the costs associated with downsizing include renovations and other measures needed to get your new home up to your standards. Why go through this twice if you don’t have to, and the financial benefits aren’t there?
If you want to map out a strategy for aging in place, the Government of Canada has an excellent guide that helps you take all considerations into account, including getting around and making sure you set up support systems.
Reverse mortgages make more sense than downsizing
While there are minor legal costs associated with reverse mortgages, they are nowhere near the 10% value of your home that downsizing can cost you. There are no ongoing monthly payments and you don’t owe a cent until your home is sold. In addition, you can only borrow up to 50% of your equity, so you will still have funds after the home is sold.
Contact Horizon Equity to find out more about how a reverse mortgage can help you keep your current home and fill gaps in your retirement savings.