Whether you’re welcoming kids into the world, kicking them out of the family home or simply reassessing your financial position, there are some big decisions to be made in order to make sure you get the most out of this process.

As life would have it, these decisions are inescapable. Upgrading and downsizing are always going to happen. Younger people having kids are always going to move into a larger home and take on a larger mortgage. Then as people move into retirement they’re naturally going to move into a smaller property.

If you’re downsizing, you may be doing for so a variety of reasons. While the most common is retirement, the modern age has brought new sets of variations – an increasing level of mortgage stress being one of them.

Where finances are stable and you want to stretch your legs, you might consider upgrading the family home to raise your kids with room to breathe.

Whatever your life stage, you need to be adequately prepared for the challenges that downsizing can throw at you.

 If you’re daunted by the idea of moving into a smaller home, our guide to downsizing offers ideas, positive thinking, and practical advice.

There comes a time in almost everyone’s life when their home no longer suits their needs. A baby on the way heralds the move from first flat to the family home, while when ‘grown-up’ children leave to set up on their own, their empty bedrooms soon become storage space for everything from spare bedding and occasionally worn clothes to old books and analogue TVs.

These days, it’s almost unheard of for people to stay in the same house for the whole of their lifetime – research has shown that the average person in Australia will make a number of moves during their life. But when it comes to older age, the decision to move is often driven by very specific needs – perhaps there are health issues that need to be taken into account or it’s a simple matter of ensuring that there are sufficient funds to see you through your retirement.

For some, selling the family home can be triggered by the death of a loved one while, for others, it’s born out of a desire to be near family or to experience a new lifestyle. A home by the sea, anyone?

In this guide, we look at what you need to consider if you’re thinking of downsizing from the traditional family home to a property to a purpose-built apartment and give advice on the practicalities if you do decide to go ahead.

Let’s be honest, there’s no point maintaining a large home on a 1012m2 block of land at the age of 60, just in case the extended family needs a place to crash when they come to visit.

When you are at this stage of your life, it can be a sensible idea to downsize and offload some of the unnecessary baggage that comes with a family home. Those who take on life change also appreciate the cost benefits of their decision. Moving to a smaller home can significantly reduce your electricity bills, water bills, council rates and time spent on maintenance.

Unfortunately, when discussing downsizing, we’re not only talking about those preparing for retirement. Some homeowners may be forced to downsize due to financial pressures where they are unable to keep up with the increased cost of living. Those who have overcommitted themselves in order to buy their dream home may start feeling the pinch as interest rates keep on rising.

Other reasons for downsizing

• being close to retirement and being asset rich but cash poor
• want to move to a better location and will compromise on size
• health restrictions call for easier living conditions
• the Baby Boomer generation (aged 45–60) is keen to travel
• you want to add more to your retirement fund
• you’re having your first child and wish to keep finances down early on
• a marriage break-up restricts funds
• the death of a partner

What are the benefits of downsizing?

• The reduction or elimination of your mortgage – Depending on where you choose to buy your new property, downsizing can dramatically reduce mortgage expenses. Smaller homes cost less to run, freeing up cash flow and giving massive savings on interest over the term of your mortgage
• Larger nest egg – Increase your retirement savings with the money you save on your mortgage
• Greater freedom to travel – Discover more of the world! Downsizing will provide you with a more manageable home base that is more easily maintained between trips
• Cheaper utilities – Lower electricity, gas, heating and cooling expenses
• Greater free time – By downsizing you have more freedom to explore and revisit activities and hobbies that you may not have been able to enjoy when you were busy maintaining gardens and a larger house
• Lower maintenance costs – If you opt for an apartment or townhouse, you’ll lighten your load significantly
• Peace of mind – Less clutter and less or no debt will lead to a clearer state of mind and give you the opportunity to enjoy a new, simplified home and lifestyle

What are the signs that you need to downsize?

Moving into a new home can be a hassle. Nobody really enjoys packing up all of their belongings and carting them off to a new place. This can lead many people to stay in their houses for a long period of time, despite their needs or the family’s changing over time.

But sometimes moving to a new house is a necessary part of life. Whether it’s due to a steadily growing family, children moving out or shifting for a new job, there are many reasons why you might need to relocate.

• It’s no longer what you want: There may be many things you like about your home, but over time, there may be other things you have begun to dislike. For instance, perhaps you liked your home’s proximity to a nearby primary school for your children. But if your kids have all grown up and moved out, you might not appreciate the noise anymore.
• You’re strapped for the room: When you bought your home, you may have thought two bedrooms would be sufficient. However, since you moved in, your family might have expanded – rapidly. If you’re so strapped for a room that all of your kids are sharing bedrooms, it might be a sign that you need to move on to a bigger house. Maybe you’ve accumulated a lot of belongings over the years and your garage is now full-to-bursting, bringing about the need for a home with an attic and other storage capabilities.
• Neighbourhood: Over time your neighbourhood can change. The house next door might have once been occupied by a nice family, but has since become rented student accommodation. A busy shopping mall may have been erected at the end of your street. Perhaps the owner of the house next door has now become the neighbour from hell.

These are all good reasons why you might want to consider moving to a brand new area, as being happy in your home is extremely important.

Considerations when downsizing

Any change as great as downsizing is going to have an impact on your livelihood. When you’re economising on your property, the common reaction is that you will have more money and time to enjoy life, move closer to family and spend time with your friends.

Location

If you’re retiring, you might choose to move out of your local area. Some of the hot spots for retirees downsizing are the smaller areas up and down the coasts outside of capital cities. These sea-changes are all tempting offers for retirees, but what often doesn’t come into play is the comfort zone that you’re leaving behind. If you previously lived close to the city or family and friends, your social networks are at risk of being severed by the distance.

Of course, if you are a young family struggling with your mortgage, downsizing might also mean reconsidering the area you can afford to live in. This can be a hard step to take as your proximity to amenities and family can be just as important as for those retiring.

Type of property

Whether you choose to downsize or financial stress requires you to do so, it is important to consider what you want now and into the future. This will help ease the transition into a smaller property.

Retirees must be mindful of the access to their new home and how much maintenance they will be taking on. Remember, the reason you left the bigger home was to reduce the physical stress, not take it with you.

Understand that if you are moving from a large home to a unit complex with other residents nearby, you might require some time to adjust to the increased levels of noise and diminished living quarters.

On top of this, there are the many years of possessions that you will need to cull (or pay to store) so that you fit comfortably into your new space. If you are a retiree, ensure your property:

• is easy to navigate through
• has limited common walls and is in a smaller block
• is close to shops and amenities such as medical facilities
• is within easy walking distance to transport

If you are downsizing to reduce financial stress, begin by searching for a property in your existing area, although you will most likely have to reconsider your current location. Of course, re-assessing your property budget will have counter effects on your life.

Costs of downsizing

While downsizing can free up more money for your everyday expenses, moving to a unit or a strata complex may end up taking some of this financial freedom away again.

In fact, your strata fees for a simple unit block of around 12, with no lift and no added extras can cost around $400 a quarter. This is $400 you do not have to pay when living in a separate dwelling.

The process of selling your home and buying into a new property can cost up to 11% of the purchase price and if you’re not making much from your sale, the additional $400 a quarter – or $130 a month – can be crippling.

If you’ve got your eye set on an over-55s development or retirement home, these fees could escalate even further.

What are some home downsizing tips?-

Downsizing your home raises lots of questions so here are some tips:

• Choose a location that is central to where your children and friends live, if possible
• Check the closet and storage space in smaller residences and be sure you have enough room
• There are common access points in apartment living such as parking bays, corridors, and lifts. It takes time to adjust from living in a residential house so be sure you understand the limitations of ‘common property’
• Apartment blocks have body corporate rules and, often, minimum fees per month that you may wish to review before purchasing your dream downsize apartment
• Consider an extra room can that can double as a part-time study, reading room or bedroom when friends, guests, children, and grandchildren visit
• If downsizing for retirement, consider only properties with at least one downstairs bedroom and bathroom so stairs cannot become a problem – forcing you to move again

Regardless of your reason for downsizing, it's certainly something that needs to be planned and thought through thoroughly. Your account and financial advisor are well placed to give you additional advice as well as seeking guidance from your trusted real estate advisor regarding local prices and trends.