Downsizing for retirement has its appeals.
Your daughter’s in college. Your adopted son and his partner have a family of their own. Friends and family are asking, do you really need all that space for yourselves?
What a lifestyle dilemma!
When to Downsize: What Retired Canadians Think
At what age do most seniors downsize? Nearly half of Canadian baby boomers old enough to retire are making no plans to downsize. See the survey results from a 2018 Ipsos survey of 2,501 Canadians 55 plus.
Aging researchers were surprised to find the same results.
- Statistics Canada says seniors are less likely than most Canadians to move.
- 4.7% of Canadians over 75 relocated in 2016 — compared to 13% of other Canadians.
- Most downsizers were separated, widowed or divorced.
Ryerson’s National Institute on Ageing found 91% of seniors (the 2020 Generational Real Estate Trends Report: Aging in Place reports 86%) plan to stay where they are, as long as they can. What the Aging in Place report found.
When Leger canvassed 1,000 Canadian baby boomers (born from 1946 to 1964), 17% planned to buy a new home by 2023. Only 48% expected to downsize, while 63% of Ontarians said they can’t afford to retire in their own community.
You’re in good company.
7 Reasons Retirees Downsize
CHIP, Canada’s reverse mortgage provider, found seven reasons baby boomers downsize:
- Pay off a mortgage or debt.
- Reduce heat, hydro, or taxes.
- Stop playing house and with the yardwork, too.
- Live closer to loved ones.
- Snowbirding — who needs a big house when you’re rarely there?
- Finding extra cash for retirement.
- Too much square footage.
Pros and cons when you make a firm offer.
How to Downsize Step by Step
If that rings true, Graying With Grace recommends you:
1. Start early.
Realtors who have senior clients agree: downsizing is stressful. Take your time. You didn’t get where you are by being impulsive. Act deliberately and confidently.
2. Make a plan.
Start looking for housing types, neighbourhoods or communities where you might like to live. It helps to have something to show a realtor. Get out a map and take a spin by car or bus to stake out your new habitat.
All those memories. All those decisions about what to gift to kids or friends and what to sell or give away. Now’s the time to declutter your life by finding new homes for vehicles you don’t need (family-sized RV, anyone?), adorable but worthless collectibles and musty, basement loungers.
4. Get the family to help.
No point doing it all yourself. Those high school yearbooks and UglyDolls didn’t get into the attic by themselves.
What to Consider Before You Downsize
Without all the space you’re used to, will downsizing allow you to invite friends in for dinner, have family stay over at Christmas, or hang out in a “man cave”? Could a new home have conveniences like an insuite laundry or a stair lift?
After real estate commissions, legal fees, land transfer taxes, and buying smaller furniture, many retirees didn’t save much by downsizing after retirement. So why downsize at all?
Pros and cons of owning after retirement, according to Boomer & Echo magazine:
When to Buy
Boomer & Echo magazine landed on some interesting pros and cons of owning after retirement.
- Fewer costs, more money to invest
- Take advantage of the market to cash in and build equity
- Earn income through a reverse mortgage
- Leave your home to beneficiaries
- Decorate or renovate to your own tastes
- Predictability — no landlords or rent increases
- Lifestyle amenities like swimming pools or groomed walking and cross-country ski trails.
Hire a real estate lawyer (Ontario).
- Buying a new home ties up your money
- Real estate prices could be at their highest when you buy
- Repairs and maintenance can eat into your savings — who needs the extra work?
- Property taxes and homeowners’ insurance just keep going it
- How long will you stay in your new home before you move again?
- You could use your savings to rent or make inter vivos (while you’re alive) gifts to beneficiaries
- Selling when you’re older could be taxing (but then, when isn’t it?)
- Ontario seniors who’ve moved while downsizing say they struggled to fit into new communities and lifestyles.
Questions to ask your Ontario real estate lawyer.
Getting a Mortgage After 65
Age is no obstacle to getting a mortgage for more retirees. Company and government pensions are steady sources of income. Lenders consider self-employment, commissions, bonuses, or investment income. If you own other property with equity room, your bank may look at that as well.
Don’t fuss about stress tests. Credit unions and private lenders don’t require stress tests and are open to lending to seniors.
Bring these documents to your real estate lawyer appointment.
Using RRSPs for Down Payments or Mortgages
As long as you haven’t hit the magic 71 number, you and your spouse or common law partner can still withdraw $35,000 each from RRSPs for a mortgage down payment.
You have up to 15 years to repay — you can make regular monthly payments or, if you want, repay your RRSP in a lump sum, as long as you repay it before you turn 71. More on the Home Buyers’ Plan.
Once you reach 71, repayments are no longer possible. So you will need to either:
- repay your RRSP in full
- make a partial repayment and include the balance on your income tax return
- or make no payments that year and count it as income.
Before you withdraw funds from a RRSP, talk to a tax accountant or financial advisor about the best strategy for minimizing your taxes. They can advise if RRSP mortgages or withdrawals have a place in your financial plan. Get a RRSP mortgage.
Why You Need a Real Estate Lawyer
Axess Law’s licensed Ontario lawyers review the agreement of purchase and sale or pre-construction purchase contract for terms and conditions that preserve your right to cancel or make amendments. We answer any real estate questions you have.
Our licenced real estate lawyers close real estate transactions on time and for less than you might expect. Your Axess Law real estate lawyer can receive legal documents from realtors and mortgage lenders and search titles to property for construction liens or outstanding debts that can hold up your sale.
We have affordable lawyers nearby in Greater Toronto Area and Ottawa. Pressed for time or live outside the GTA? Ask about our virtual real estate lawyer service.
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