Home improvements: What pays off and what doesn't?
If you’ve lived in the same spot for many years and the kids have all left home, it might be time to consider downsizing. By selling up the large family home and moving to something smaller, it’s not only a way of making life more manageable, but it can also free up money that might be better used in other ways. We’ve put together some ideas to help anyone that might be thinking of downsizing.
When to downsize
For many older people it’s not until the kids have grown up and left home, or we’ve retired, that we realise exactly how much unnecessary extra space we have at home. But it’s not just retirees or parents of families that have left the nest who stand to benefit from re-evaluating their living , downsizing might be a worthwhile option for anyone who sees their finances stretched too thinly just from servicing too large a mortgage -- anyone who finds themselves asset rich, but cash poor.
The upshot of all this is that there’s really no right or wrong time to consider downsizing, but plenty of reasons to consider it.
The advantages of having a smaller home
Having a smaller home brings with it many practical benefits that might suit people in all situations. Things like having smaller or even no lawn to mow, less garden to maintain, and less house to paint -- it all adds up. By downsizing your home, you can free up large chunks of time that you might prefer to spend doing fun stuff instead of chores.
Try not to get carried away
Of course, downsizing means just that -- if you move somewhere smaller, you’ll not have room to store all the belongings you’ve lovingly (or perhaps absent-mindedly) collected over the years. Sorting through your possessions and deciding what to keep and what to get rid of can be difficult or even traumatic for some people. So before you sign up for a two bedroom city apartment, first make sure it’ll have enough room for everything you simply cannot part with.
The financial benefits of downsizing
In addition to the practical side of downsizing, there are a number of financial benefits, mainly stemming from what you can do with money that you’ve freed up by selling the big house and buying small.
If you have enough equity, you could pay off the mortgage by downsizing. Depending on how much money this frees up, you might be able to look at investing some of it. It might be a good time to consider buying a rental or looking into other forms of investment -- adding it to your Kiwisaver perhaps.
Consider the costs
So far we’ve talked about the various benefits to downsizing, but it’s worth keeping in mind all the costs that go with buying and selling property -- especially if it’s been a while. Remember you’ll need to pay legal fees, agent fees and bank costs. So if you’re downsizing because money is tight, bear these costs in mind when you’re figuring out how much money you’ll make.
We take a holistic approach to financial advice
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