A few years ago, my mom sold our family home on a leafy Toronto cul-de-sac and moved to a small, cheaper condo closer to downtown. In doing so, she followed in the footsteps of countless aging Canadians cashing in on high home prices to help fund their retirement lifestyle. But downsizing isn’t for everyone – according to a survey by Royal LePage Real Estate a hefty number of Baby Boomers (over 40%) don’t plan to move to a smaller home when they retire. Instead, they want to hang on to their bigger spaces and enjoy their yards and garages. While downsizing and moving to a smaller space is a good financial solution for a lot of retiring Canadians, it’s not for everyone. Before you sell your house, make sure you carefully consider your options and avoid these five pitfalls:
1. Underestimating the monthly costs
Sure, it costs money to maintain a big house, but moving to a condo doesn’t necessarily mean life will be cheaper. Between the cost of the unit (which can be hefty depending on the location you choose), maintenance and taxes you could end up with higher monthly costs that bite into your budget.
2. Overestimating how much you’ll get from your house
You might be banking on big bucks from the sale of your home but you also need to plan for all those extra closing costs – between real estate agent commissions, legal fees and other taxes, you could end up shelling out tens of thousands of dollars just to unload your property.
3. Hanging on to the past
You’re making the big move from a 2,000 square foot home to 700 square foot apartment. You need to face the reality that you can’t take it all with you: Grandma’s china, your big dining room set and that old La-Z-Boy in the basement might not fit in your new space. Avoid the temptation to store it – otherwise you’ll be spending big bucks to store stuff you never, ever use. Instead, clear out your clutter before you move and unload things you know you won’t use again.
4. Not doing your research
That little lakeside community sure was fun to visit in summer, but living there all year round is actually kind of a drag. If you’re thinking of relocating to a different community, try renting before you buy – otherwise you could be tied down to a real estate investment that you can’t easily sell if you don’t like living there. MoneySense also has this great guide to the top places to retire in Canada.
5. Not giving yourself enough space
Are you planning to work from home in retirement? Is gardening a big part of your life? If so, a condo or small space might not be for you. A lot of people think that when the kids leave the nest, they should automatically sell and downsize. But if you can comfortably afford to live in your home when you retire, then consider hanging on to it and live there longer.
Money expert Caroline Cakebread has been writing for Chatelaine.com since 2006. She is a recovering academic and the mother of two small kids. She lives in Toronto where she writes and reads about all things financial. Follow Caroline at Twitter.com/ccakebread.