Q: My husband and I are both retired, we’re aged 68 and 71. Our residence is much too big for us to clean and maintain. We want to downsize but we live in a small fishing community and due to Covid-19, our home is proving difficult to sell. My question is, do we have to sell our property before we can move? We have some funds for a deposit, but not enough to buy a smaller house in which to live.
A: This is a great question. Essentially your question is, would you be able to obtain bridging finance to acquire your new, smaller home before you sell your current home? As usual with this type of question, the answer will include the words ‘it depends’.
Generally, it is better to have some certainty about the price you will be able to obtain for your current home before you commit to your new home to avoid any risk that you may be paying too much for the new property. There may be a local real estate agent who can give you an indication of the likely value of your property in the current market conditions.
(You will be aware that such estimates cannot be totally relied upon and it may also be worth waiting for a while until the world is a little more ‘normal’ before considering such an important change.)
Notwithstanding this, it will not be easy to find a lender who will provide this type of finance because you are retired. It may be worth talking to a mortgage broker to see whether or not it is possible to obtain this type of finance in your circumstances before making any further decisions. Certainly, at this time, with interest rates very low, the effective cost of the bridging finance should be modest.
Additionally, it is worth noting that when you do downsize, you are potentially entitled to contribute more money to superannuation under the downsizing provisions. You could contribute up to an additional $600,000 into super as a couple, notwithstanding the fact that you are already retired.
For your information, I have set out below the requirements which you need to meet in order to be able to make such a contribution. Financial advice is recommended for such a decision.
You will be eligible to make a downsizer contribution to super if you can answer yes to all of the following:
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