Downsizing isn’t just for retirees who no longer want to care for their large homes and yards (although that is a nice advantage). Today’s downsizer crowd covers an array of lifestyles including city lovers, empty nesters and world travellers who have decided to ditch their large homes for a condo that is flexible, comfortable and above all else, financially smart.
Between utilities, taxes and insurance, you’re spending a pretty penny on top of an already costly mortgage and that’s not even covering maintenance costs, like plumbing and lawn care. If you're not using the space in your large home, the money spent on all these aspects is just wasted. People buy large houses for many reasons, but those reasons aren’t always practical. Regardless of why you bought a large home, one fact that rings true is that the home is probably worth a whole lot more now than when you bought it.
If you are sitting on equity from your home, this is a good year to buy or invest with more selection in preconstruction condos in the GTA than ever before. If you have a large home and you aren’t using all the space, now might be the right time to downsize. According to the Conference Board of Canada, more than 80% of new housing demand will come from those over 65 in the next 20 years. And a recent poll reported that 1 in 6 adults in Ontario plans to move to a smaller home in the next five to ten years.
We understand that downsizing can be hard, however, there are some major reasons why downsizing to a pre-construction condo can be a smart move. Now, we won't state the obvious such as smaller space = less stuff. Instead, let’s look at 4 reasons why downsizing helps you live better-- from your wallet to your health.
The Bigger the House, The Bigger The Costs: Maintaining a larger home costs more than maintaining a smaller condo
The cost to maintain a home is substantially decreased when you downsize to a pre-construction condo. Insurance, property taxes, and mortgage loans all go up with the price of a home. Across the board, condo prices in the GTA are far less than single-family homes and that is one of the many reasons why condos are booming. Plus, the rule of thumb is-- the smaller the space, the less you pay in utilities too.
Most downsizers are surprised at unit sizes that are often more compact than expected but it is about refocusing on all that the benefits of your new condo, in your ideal location. The reality is that you are buying convenience, not space. Still, downsizing does not mean downgrading. Downsizing should, however, be less expensive, or else what is the point?
Calculate the costs associated with your current home (mortgage payments, taxes, hydro, everything) and research the potential cost to own the smaller condo you are considering. Compare the cost and how much you will save. You will most likely see that it is substantial. The idea is to pull the equity out of your home and have that available to you during retirement or to simply allow you to live the life you’ve always wanted to live. This money should leave you with a nice “nest egg” by reducing your day-to-day costs which means drawing less from your retirement income.
Make Money By Downsizing
By downsizing, you not only save money in upkeep costs but you also make more money through a little something called equity.
For the most part, the GTA is a seller's market. Because of the competitive nature of this type of housing market, there’s a good chance that the value of your home is higher than what it was when you first bought it. By selling your property and downgrading to a smaller, less expensive pre-construction condo, you’re going to earn money from the equity of your current home. Depending on the cost of your new mortgage, you could make a sizable profit after all is said and done.
If you’ve paid off the mortgage on your house, selling it and purchasing a less-expensive condo can provide you with enviable freedom. As you may know through experience, owning a big house is expensive even if you’ve paid off the mortgage, so here's a money saving tip that may sweeten the downsizing-deal for you.
When you sell an investment property, you typically have to pay capital gains tax on 50 per cent of the profit at the marginal tax rate. With that said, you might be pleasantly surprised to learn that you don’t have to pay this tax on the money you make for selling your principal residence-- this equals to major savings for you, the home seller. Downsizing to a pre-construction condo can save you a good chunk of money that you can put that towards worthwhile investments, like your family's future.
Free Up More Money To Invest
Whether you downsize your home financially or in size, your equity could very well buy an investment property to rent out or sell for a significant profit. Over the long-run, rising home values hardly beat inflation. Meaning that if you sell your home for twice as much as you paid to buy another one for the same amount, you haven’t profited yet, right? Even when homes are appreciating, there are better ways to profit than putting all your money into one piece of real estate. For example, you could sell your house and buy two cheaper condos. One to live in and one to rent out. You’ll have all the same gains from appreciation over the years plus investment income along the way.
Most homeowners are sitting on tremendous home equity that they are not utilizing at all. Are you among the number of Ontarians who are wasting a very powerful resource that will help grow your wealth? When other forms of investments like the stock market are underperforming or volatile, home equity can be an easy wealth generator-- especially for working professionals and Boomers who don’t have pensions or ample retirement savings.
Buying pre-construction for the purpose of reselling or renting it over the medium-to-long term will only get more difficult as the city gets denser, and less buildable land remains. Anticipating strong (and increasing) demand from both upsizing millennials and downsizing Boomers means savvy investors know that the time to buy is now.
It may seem counterintuitive to celebrate cutting back but downsizing can be exhilarating. After all, it’s a chance to cut costs, take charge of your life and embrace a new lifestyle-- one that is said to be much healthier.
Research from the Canadian Institute for Health Information shows that people living in the downtown core of urban centres report having the lowest body mass index (BMI), a widely-accepted way of assessing whether a person is obese, overweight, normal weight or underweight. Compared to people living elsewhere, more city dwellers report having a healthy weight.
Agencies such as the Heart and Stroke Foundation say that using your body to move you to where you perform your daily chores is called “active transportation” and it has important health benefits. In addition to the usual health benefits of exercise, the Public Health Agency of Canada suggests that active older Canadians might even live independently for longer.
Not only does living in walkable communities help with your physical health but it is great for your mental health too. A report commissioned by the Ontario Trillium Foundation determined long commutes and bad traffic have “a negative effect” on the health of Ontarians because they “reduce the time people have with their family, for leisure, and for their communities” and they increase stress and anxiety. All the more reason to downsize to a great “active transportation” neighbourhood where all you need is nearby.
What are the ingredients of an “active transportation “ neighbourhood?
If you’re thinking of making a move to make physical activity a part of your everyday routine, these are the 3 primary characteristics to look for in a neighbourhood according to the Canadian Fitness and Lifestyle Research Institute:
1. It must be safe
2. must be inviting
3. must be convenient
How to find a suitable neighbourhood?
A handy online tool called, Walk Score, is one of the best resources to find out how walkable, bikeable and transit friendly an address is. The site uses a numeric score on a scale from 0 to 100, with 0 meaning there are very few conveniences within walking distance and 100 meaning you don't need a car or public transit to get to most amenities. The scale is based on the distance to everyday errands and locales like dining, groceries, shopping, errands, parks, schools and much more. That’s why we’ve included the Walk Score plug-in to all or condominium project pages. Take XO Condos by Lifetime Developments at 1221 King Street West, for example. This upcoming condo project has a downsize-friendly Walk Score of 93/100, a Transit Score of 100/100 and a Bike Score of 53/100.