Is selling your home the right decision?
Once you’re no longer working, the decision to sell your home can be challenging. There are many financial, practical and emotional factors to consider.
If you’re like most Australians aged 65 and over, the most common reasons you’re thinking about moving house may relate to:
- wanting a smaller home—23% of people are considering downsizing
- family reasons—22% sell their homes for family-related reasons
- lifestyle—20% move for a lifestyle change
- other reasons—23% of people move for health and neighbourhood reasons1.
A financial adviser can help you decide whether selling is the right decision and may also uncover new options you hadn’t considered. Your reasons for selling your home are likely to be influenced by one of five things—or they may be a combination of several.
You may want to release the value in your home by selling and buying a less expensive place or a home that costs less to maintain. The sale proceeds or reduced expenses might help your retirement income last longer or you could use any left-over money to invest, travel or buy a new car. If your reasons for selling are financial, a financial adviser can help you explore your options.
Use the Home and retirement planner to explore how selling your property could fit into your retirement plans.
Perhaps you’d like to move closer to family or friends or the places you spend most of your time. You may want to reduce the time spent maintaining your home—cleaning, gardening or repairing—and travel without having to worry about who’ll look after your house while you’re away. Selling may be a good option, but you may also find ways to stay there for the long term and change your house to fit your needs in later life.
Living elsewhere—in a warmer climate for example—may improve your health. You may also need to be close to health care or specialist services.
A fresh start
Downsizing your house may seem like a good option, because your children have moved out or maybe you’ve lost your partner, spouse or a family member. If a personal event has triggered your desire to move make sure you’ve given yourself enough time to adjust before deciding what to do next. It’s never too early to start looking at your options, but try to put off a big decision until you’re sure it’s the right one.
A good opportunity
It may seem like the right time to sell your home depending on the property market in your area. You may have even found a house you’d like to buy. Make sure you’re aware of the financial impacts and how the move may affect your social life.
Can downsizing give you a better lifestyle in retirement?
Did you know that almost one in four Australians aged between 55 and 64 moved home in the previous five years?2
If you’re thinking of selling your home to improve your retirement lifestyle, there are many financial, practical and emotional factors to consider first.
As you approach retirement you may have substantial equity in your home or may own it outright.
Selling your home with the intention of buying another one that is easier to maintain or closer to family might be a good lifestyle choice. And it could also release money for you to invest in shares, term deposits, managed funds, another property or a superannuation account. This could provide you with more income in the future, giving you different choices in retirement.
But before putting your home on the market, use our home and retirement planner and make sure you:
- understand your reasons for thinking about selling
- have a clear idea of all the implications of selling your home—financial and otherwise
- obtain financial advice
- explore other options for releasing the equity in your home. For example, will a reverse mortgage be an effective way for you to increase your retirement income? Find out more at the MoneySmart website, and consider the benefits and risks of a reverse mortgage before making up your mind.
What are the hidden traps in downsizing for retirement?
Selling your home may not be an easy or simple decision. There can be unexpected expenses and consequences that affect your government benefits entitlements. There are also many other things to consider before you sell. And there are lifestyle issues to think about too.
You can avoid hidden traps by planning as far ahead as possible and being prepared for the unexpected—professional financial advice is a good place to start. The table below outlines some things to consider.
|Potential trap||Managing the trap|
A smaller place isn’t always cheaper.
Understand all the costs of moving, living in and maintaining a new home before you move.
Selling your home could impact your age pension entitlements.
Be aware how the money from the sale of your home will affect you under government assets and income tests.
You may miss people and services in your current area.
Explore options like house sitting if you’re thinking of moving to a new area, so you can trial a potential location before you commit.
It may be difficult living in a smaller place.
Try locking up some of the rooms in your current home and doing without items you may not be able to take—you may or may not be ready to move to something smaller.
You may not be as prepared for the change as you’d like to be.
Aim to understand exactly what downsizing will mean for you and what’s most important.
The home you buy turns out to be unsuitable down the track.
Before you sell or buy another home, work with a financial adviser to make a long-term plan that can help you understand your options and potential implications.
You’re unable to sell your home for the price you’d like, because of issues in the property market.
A financial adviser can help you decide how much money you need to achieve your goals.
Put a plan in place that will help get the best price for your home and buy at the right price too.
Some of the things to consider include:
Avoiding the traps
Before considering whether or not to sell your home, it’s important to thoroughly understand your reasons for selling.
A financial adviser can help you:
- take a systematic approach to your decision
- consider the emotional impact of selling your home and moving
- understand exactly how much downsizing will cost
- decide on the right time to move—considering your goals and the property market
- make the most of your opportunities and avoid unexpected expenses. For example, consider how long it may take you to find a new home and whether it’s better to sell first or buy and then sell
- understand what matters most to you, so you can set your downsizing and retirement goals, and achieve them.
Important informationShow more
It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement before deciding what’s right for you. This information hasn’t taken your circumstances into account.
This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.
The issuer of AMP Flexible Super is AMP Superannuation Limited. AMP Flexible Super is a registered trademark of AMP Limited.
1 Australian Bureau of Statistics, Australian Social Trends (December 2010).
2 Australian Housing and Urban Research Institute, Downsizing amongst older Australians (2014).