In today’s economic landscape, many homeowners are concerned about the costs involved in downsizing, weighing whether or not the process is beneficial enough to justify the expense. As veterans of Toronto’s dynamic real estate industry – and downsizing specialists, we’re here to offer clarity.
Not only is downsizing idyllic from a lifestyle perspective, but it also offers a number of benefits in terms of fiscal planning and personal finances. Therefore, not only is downsizing worth the costs involved, but it can also help homeowners preserve their savings in the future.
Continue reading for further insights.
Thinking of downsizing? Our strategic advisory services can ensure you accomplish a smooth transition. Call us at 416-722-4723 or reach us by email at evan@christensengroup.ca.
What Are the Costs of Downsizing?
Downsizing is a significant journey, one that entails two separate real estate transactions. Therefore, understanding the complete costs of one’s downsizing process requires consideration of the costs involved in both buying and selling property.
Commonly, the most significant expense involved in the downsizing process is commission—specifically, the professional fees paid to your real estate agent upon the sale of your current home. The exact percentage or rate of this cost is dependent on the professional you choose to work with; however, it should be factored into your greater financial planning as it will impact the final returns of your sale.
Note that in Toronto, downsizers typically do not pay commission upon the purchase of their next property. Rather, both agents involved in that transaction will be compensated by the seller. That said, there are substantial purchasing costs to be aware of. The largest of these costs are land transfer taxes – which are accrued on both the municipal and provincial level. Like annual property taxes, these levies are calculated based on a number of factors including the assessed value of the property.
In addition to transactional expenses, downsizers must also factor in various accessory costs related to their transition. Examples of this include professional moving services and off-site storage for larger furnishings. Due to the personal nature of these items, these peripheral costs will vary.
Searching for more resources tailored to downsizers? Consider these related posts from our blog.
- Why You Should Downsize in Toronto, Rather Than Outside of the City
- West Toronto: A Downsizer’s Haven
- How to Downsize Without Hassle
Alternative Options For Downsizers
While most downsizers elect to sell their property and navigate the costs involved, some homeowners follow a different path. Rather than selling, it is possible to keep your current home and utilize it as a dedicated income property once you’ve moved on to a smaller place.
This presents the opportunity to continue building equity and earn quality passive income as part of the downsizing process. Although it’s not suited to all downsizers, it’s a compelling alternative for those who are investment-savvy and will not require capital from the sale of their existing home in order to buy a new property.
The Financial Freedom of Downsizing
Beyond the pragmatic or lifestyle-focused benefits, downsizing also grants various financial perks.
Speaking generally, the transition to a smaller home typically means managing smaller carrying costs. With a change in residence, downsizers tend to take on lesser monthly mortgage payments, insurance costs, property tax rates, and other housing-related expenses. To that end, the expenses incurred during the transactional and transitional elements of downsizing are often more than accounted for with these savings.
Further, downsizing allows homeowners to unlock the equity that they’ve built in their existing home. If you have lived in your current residence for several years or even decades, it has likely appreciated in value quite significantly. Upon sale, your returns will be relatively substantial. This factor, paired with an informed and strategic buying process should leave you with leftover funds following your downsize. How you decide to use these funds is up to you.
Fixed Income Considerations
As you enter retirement, managing your money will be an important part of ensuring your comfort and security. While the financial advantages of downsizing your home are compelling at any stage of life, they are particularly advantageous during the transition away from full-time employment.
In retirement, you are working with a fixed income to manage short and long-term expenses. With that in mind, the reduced costs of a smaller property allow downsizers to protect their bottom line when they’re no longer earning income from employment.
For downsizers, selecting the right neighbourhood is imperative for a high quality of life. Discover more community-related insights below.
- Luxury Migration in West Toronto
- Toronto’s Undiscovered Communities
- Selecting the Right Neighbourhood as a Relocator
How to Optimize Your Downsize
Given the complex nature of downsizing, working with an elite, experienced real estate agent is a critical facet of a successful transaction. That’s where we come in – Christensen Real Estate Group.
Guiding you through the entire process from start to finish, we’ll assist you in facilitating a smooth transition to your new home. Whether you need assistance with decluttering, preparing your property for the market, or more, our in-house team and extended network of real estate professionals can ensure you get the best result possible.
Ready to move to a smaller home? Our strategic advisory services can help. Call us at 416-722-4723 or reach us by email at evan@christensengroup.ca.
