Things to Consider When Upsizing, Downsizing or Buying a New House

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Are you empty nesting and wondering if the extra couple of rooms are worth the upkeep? Or maybe you’re itching to make a treechange or a sea-change? Perhaps you’re looking forward to joining a retirement community? Whatever your reason for moving home, there are a variety of aspects of home buying and finance you need to consider as a retiree. Here are the major things to consider when you’re upsizing, downsizing, or buying a new home as a retiree.

What’s your plan?

Before you set off to look at homes, you need to assess your overall plan. Are you looking to downsize, upsize, or move to another location altogether? Perhaps you may also be considering joining a retirement community, which has its own complicated set of rules. Some may only allow leasehold arrangements, licence agreements, Strata agreements, or company title schemes. The full list of options are outlined by the NSW Government here.

Either way, you’ll need to know the upfront and ongoing costs and how you’ll intend to fund the purchase or lease.

Exit strategies – super, downsizing, or asset sales

If you are looking to finance a new home, there are three common exit strategies retirees often follow: that is using their superannuation, downsizing into something smaller and cheaper, or selling other assets to fund the sale of something larger or more expensive.

You could use your superannuation payments as the basis for your monthly repayments if you decide to finance your new home. If you’re downsizing from a larger property into a smaller property, the proceeds from the sale can be used to purchase the property outright.

You could purchase your new property using a “bridging loan” before selling your old property – though these have additional costs and interest attached if you decide to go down that route.

You could also sell other assets such as property, shares, or other major assets such as cars you no longer drive, furniture you no longer use, etc. Just be wary of any Capital Gains Tax you may incur in the sale.

Finance options for retirees

If you are thinking of upsizing or moving somewhere more upmarket, you may have to consider home loan options for retirees. Selling your old home or unlocking your home’s equity to fund a new home may not cover the cost of the new property, which means you need to find finance. If you have high or total equity in an existing asset, you can use that as collateral for a new mortgage and potentially open your old home as an investment, which may bolster your cash flow in retirement.

If you don’t have high equity or property and are on an age pension, you may still qualify for some home loans – though you may have to temper your expectations a little.

See a financial adviser

Whatever you propose to do, it’s best to meet with a financial adviser to discuss your options. Though this article might have given you a few ideas, the professionals can guide you through the entire process!

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