The pros and cons of downsizing your home

If you’ve recently made some financial or lifestyle changes, downsizing your home might have crossed your mind. Moving homes can be a bit of a hassle, but that shouldn’t stop you from making a move if it’s the right decision for you.

Benefits of downsizing

Financial advantages

Moving to a smaller home may result in more financial freedom. This may come in the form of:

• lower monthly mortgage or rent payments
• cheaper utility bills, and
• reduced maintenance costs.

You may also have increased cash flow – allowing you to put more funds towards other goals, such as saving for retirement, paying off debts, or travelling.

The sale of your existing home might even allow you to pay for a smaller home outright.

A simplified life

Whether you’re downsizing to a smaller house, an apartment, or even a caravan – a smaller home means fewer responsibilities and less time required for household tasks like cleaning, gardening and maintenance.

You could have fewer possessions and less clutter to organise and manage – freeing up time and energy to spend with family, pursue hobbies or participate in community events.

Environmental benefits

By downsizing, you can reduce your carbon footprint and help protect the planet. A smaller home generates less waste and emissions, and requires less energy and resources than a larger one – making your downsizing an environmentally-friendly choice.¹

Challenges of downsizing

As with any significant life changes, downsizing is not always easy. But there are some ways you can minimise the stress before and during the move.

Moving costs

Unless you have friends or family members to help, you may need a removalist to get your belongings to your new home. This could cost anywhere between $300 and $3,500, depending on how far you’re moving and the amount of stuff you own.²

Consider doing a comparison of different removalists and perhaps donating some furniture or appliances that you no longer need. This may help you save money.

Did you know Apia Home Contents Insurance can cover your contents in transit? If you have contents cover and you are permanently moving to a new address in Australia, Apia will cover your contents in case of loss or damage while they’re being moved. This cover applies to loss or damage caused by:

• fire – including bushfire
• flood, and
• collision, overturning, accident or theft of the vehicle carrying your items.

However, there’s no cover for loss or damage to cash, smart cards or documents able to be cashed or traded. Limits and other exclusions apply so be sure to read the PDS for the full details.

Make sure to contact us prior to the move and we can help cover your belongings as well as your new home.

Get Apia Home and Contents Insurance Quote

Adjusting to a smaller space

If you’re used to living in larger homes, it may be difficult to deal with the loss of extra space. However, focusing on the positives – like those listed above – can help.

In fact, some studies have shown that owning fewer belongings can make a person happier³. Spending money on experiences instead of items forms positive, lasting memories that can fuel happiness and promote social interaction.

Finding the right home

Leaving a family home behind can be an emotional experience. However, what may seem even more challenging is finding a suitable home to move to.

When researching homes there are some things you can consider to help simplify your life:

• Moving to a home that doesn’t have stairs, steep driveways or other accessibility challenges.
• Moving to a so-called “lock and leave” property; typically a smaller house or unit that is close to neighbours and offers advanced security.
• Moving closer to the things you need and love – including family, shops, favourite restaurants, clubs and healthcare services.

Think about what’s important to you and what neighbourhoods or communities might fit your planned lifestyle.

Tips to implementing a downsize

There are many ways to sell your old house and purchase a new one. Selling your old property first before buying a new one can be more cost-effective – you’re less likely to be in a rush to sell so you can finance your new home.⁴

You may also wish to get advice from a real estate agent or financial advisor about either refinancing your current loan for the downsized property, or tapping into your home equity to pay off your remaining debt.

How to manage your home equity

Your home equity is the portion of your home’s current value that you possess at any given time. Initially acquired with the deposit made when you purchased the property, this amount continues to grow as you make your mortgage repayments and the value of your home appreciates.

In other words, equity is the difference between what’s owed on your mortgage and what your home is worth. Depending on your circumstances, you may be able to leverage your equity as collateral, which can be used in a variety of ways:

• Renovating your current home. This could potentially increase its value and help you sell it at a higher price.
• Consolidating your debts into an equity loan which could have lower interest rates than other types of credit.
• Using the equity towards financing the deposit on an investment property.

Seek independent financial advice and consult your home loan specialist before making any decisions.

Read more:

• How water damage can impact your home
• What to look for in a modern caravan
• Creating a work/life balance as you transition into retirement

¹ Anthropocene Magazine
² Canstar
³ National Public Radio
⁴ HomeLight

Australian Pensioners Insurance Agency Pty Ltd (Apia) ABN 14 099 650 996 is an authorised representative of AAI Limited ABN 48 005 297 807, the product issuer. Read the Product Disclosure Statement before buying this insurance. Limits, conditions, exclusions apply. The Target Market Determination is also available. The advice has been prepared without taking into account your particular objectives, financial situation or needs, so you should consider whether it is appropriate for you before acting on it.

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