While nearly half of Canadian homeowners don’t plan to sell their homes when they retire, 34% are still unsure what they’ll do. Moving to a new city or downsizing to a more compact home can offer advantages, but depending on your goals, depending on your goals, a few disadvantages as well. If you’re thinking about a post-retirement move, consider these pros and cons before you start packing:
When you relocate to a new city or property:
- Pro: Save money on daily expenses: if you relocate to a less expensive area, you’ll be able to stretch your retirement savings further. Consider the benefits of a suburb vs. city, and look to exotic areas that provide a lower cost of living. Mexico, Panama and Costa Rica are popular post-retirement spots for Canadians. Or, look to Buenos Aires, Argentina, where you can rent a one-bedroom apartment for only $400 a month.
- Con: Spend money on moving costs: even if you’re exchanging your current home for a less expensive property, moving isn’t cheap—real estate agent expenses, land transfer tax and moving costs can dissolve a big chunk of money. For example, in Toronto its estimated that land transfer costs, legal fees and moving expenses alone would equal more than $18,000. Plus, you’ll have to consider the cost of traveling to visit family and friends, but if you pick a tropical locale, Canadian friends and family may be more likely to come visit you.
When you downsize to a condo or rental unit:
- Pro: Save time with maintenance help: tired of shoveling snow and cutting grass? Move into an apartment building, condo or town home. Many building owners will take care of property maintenance for a monthly fee. A significant number of homeowners over 65 choose to sell their homes, preferring to rent instead. According to the Canadian Mortgage and Housing Corporation, 78% of those 55 to 64 own property compared to only 68% of those 75 and older.
- Con: Spend time to downsize belongings: condensing decades worth of personal belongings, furniture and other items isn’t easy—one possible reason a recent survey found that nearly half (43%) of Baby Boomers who want to move don’t want to switch to a smaller home. If you declutter now, you’ll have less to clean and organize during retirement.
- Pro: Increase your available funds: a study found that the average Canadian thinks they need $908, 000 for a decent retirement. By selling your home, buying a less expensive one with the profits, and then investing the leftover cash, you can boost your pre-retirement financial status. Downsizing to a smaller, less costly home may even help you retire earlier by your amount of available funds.
- Con: Decrease your available equity: if you stay put, your home equity could potentially provide a back-up plan should you run out of savings. You could borrow against the equity you’ve built in your home with a home equity line of credit—just be sure you can make your monthly loan payments. Equity could also help fun a retirement home stay, where monthly fees range from $1,453 to $3,204 a month.
Source: BMO Bank of Montreal
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