Maybe your children have moved out, leaving you rattling around in an ‘empty nest’. Perhaps your much-loved garden, lawn or outdoor entertaining area is becoming increasingly difficult to maintain. Or maybe maintenance bills are piling up for physically taxing jobs around the house, like cleaning the gutters or windows.
Sometimes, downsizing is a result of your house simply not being suitable for your needs as you age. A two-storey house was fine when you had a growing family, but not so much now you’re getting older. You might just want to simplify your life, so you can spend less time on housework, maintenance and gardening, and more time enjoying yourself; or maybe you want a tree or sea change, move closer to your family, travel or invest.
If you have an existing mortgage, will you need to borrow more money to buy your new downsized property? Will you need a bridging loan to cover the gap between selling your property and buying a new one? And will you be able to manage an increased debt burden?
Whatever your reasons for downsizing, do your research on your options. We recommend talking to a financial advisor, because everyone’s circumstances are different and you need personalised advice on mortgage and tax matters. Downsizing won’t necessarily mean moving to a cheaper property.
Sometimes in the excitement of a new home, we can forget about the costs that are part of selling a house and buying a new one. There’s the sales commission from the real estate agent (generally around 2-2.5 % of the sale price), legal fees from solicitors and conveyancers, and moving and storage costs.
You also need to be across costs of your downsized lifestyle. Apartments have compulsory body corporate fees, which can range into the tens of thousands per year. Depending upon their payment structure, retirement communities may have deposits, entry payments, a flat purchasing price, stamp duty and extra fees and charges.
Your aged pension payment can also be affected: the family home is exempt from the aged pension assets test, but the amount you get when you sell it isn’t. Your pension entitlement depends on the value of your assets and the income you receive, so selling the family home may lower your payments or make you ineligible.
Since 1 July 2018, if you are aged 65 or over and sell your primary residence that you have lived in for more than 10 years, you may be eligible to make a non-concessional contribution into your superannuation account. A non-concessional contribution is a payment from your savings or from income you have already paid tax on. It isn’t taxed when received by your super fund.
This non-concessional contribution, known as a ‘downsize contribution’, has a lifetime limit of $300,000 per eligible owner. It is also excluded from your normal non-concessional limits. You don’t have to buy a smaller home to qualify for downsizing, nor are you required buy another home. You will need to make a downsizer contribution to your superannuation within 90 days after the change of ownership (ie generally settlement).
If you’re ready to think about downsizing, we want to see it done right. We have Mobile Banking Specialists who walk the whole journey with you, we give you access to financial advisors, and our award-winning team is made up of people who understand your world.
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Following the decision by the Reserve Bank to reduce the official cash rate, QBANK will reduce interest rates on its variable rate home loan products for owner occupiers and investors by 0.15% per annum. Mortgage secured overdraft rates will also be reduced by 0.15% per annum.