8 things you need to know before you downsize in 2017

If selling up the family home and downsizing is on your list of goals for 2017, then there’s a lot you need to know before you make your decision.

Whether your downsizing plan sees you hitting the road in a caravan, or make a sea change to a retirement village on the coast, there are a number of things you should take into consideration.

Downsizing your home can have an impact financially, particularly for your pension and your estate planning.

With that in mind, here are a few important dos and don’ts to take note of when downsizing.



1. Give yourself plenty of time

In a blog on the Financial Planning Association of Australia website, financial planner Wally David advises that you should start the downsizing process early. He suggest planning a few years in advance, giving yourself plenty of time to work out where you’d like to move to and calculate the numbers. “You want to make the most of your new surrounds and have plenty of time to enjoy your new lifestyle,” he writes. “It’s a stressful thing to go through and it doesn’t get easier as time goes on.”


2. Ask for help or advice

While buying and selling a home can be emotional, it’s important you stay rational and logical. That’s why David suggests asking someone for help. “Whether that is a family member, friend or financial adviser, you need someone who can bring a fresh pair of eyes to the situation and assist with making sense of the fine print,” he writes.


Read more: Is downsizing the key to a happy life?


3. Check any impacts on your pension

You should ask your financial advisor to help calculate how your move will impact on your pension. If you choose not to use a financial advisor, there is a Financial Information Service through Centrelink to help you make a decision.


4. If moving to a retirement village, calculate what you would be left with if you were to move again

If you’re planning on moving to a retirement village, you should be aware that many charge a fee (Deferred Management Fee) for each year you live there. How does the fee work? Well, for each year you live in the retirement village you’re charged a particular fee. The fee is taken out of the proceeds when you choose to sell your home/villa/unit and leave the village. Chances are the amount you leave the retirement village with when you sell – whether that be because of another downsize/medical reasons or death – will be less than what you paid.


5. Take into account any monthly/annual fees the retirement village may charge

Most retirement villages also charge a monthly fee to help cover the cost of running the village. It’s important you take this extra cost into consideration, as it won’t be covered by the money you pay to buy in the village. Chances are it’ll be indexed with CPI as well, so make sure you have enough to cover the fee for the time you plan on living in the village.


Read more: Why downsizing doesn’t need to be a compromise



1. Buying a new home before selling your old home

One of David’s most crucial pieces of advice about downsizing is to not sign a contract on a new home until your old home is sold. “I have witnessed this a few times and it can get ugly, causing unnecessary stress on those involved,” he said. By waiting for your old home to sell first, you’ll avoid unnecessary stresses such as having to sell other assets or getting bridging finance to buy your new home. Plus, you never know how long it could take to sell your home or whether you’ll get what you want for it.  “By selling your home first, you avoid the extra stress, you will know exactly where you stand financially and you can purchase with confidence,” David writes.


2. Dismiss the idea of staying put for a little while longer

If the numbers aren’t working, or you’re not sure it’ll work out – there’s no harm in staying put. By staying put a little longer, you can avoid the stress of moving and potentially impacting on your pension. If your reason for moving was due to a medical condition or your ability to move around, consider bringing in someone to help you out or install some aids to assist with mobility and safety,


3. Sign any contracts until you get some advice

When it comes to retirement villages, contracts can often by complex. That’s why David advises you get a professional to look over them before you sign anything. He writes that during the 2011/12 financial year, Consumer Affairs Victoria received “more than 500 enquiries about retirement villages”. Many of those queries surrounded contract terms and fees.


Are you looking at downsizing in 2017? 

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