Downsizing or “rightsizing”? What you should know about moving post retirement

So the last straggler child has finally decided to leave the nest, at last you have the time to declutter your home and you’re thinking maybe you don’t need quite this much space.

Well if you’ve been contemplating moving somewhere a little smaller lately, you’re probably not alone. According to a recent study from the Australian Housing and Urban Research Institute, more than half of Aussies aged 55 or over have downsized or are thinking about it.

But downsizing isn’t about downgrading. As Dr Amity James from Curtin’s School of Economics, Finance and Property said, “While downsizing may include a reduction in dwelling size, to older Australians it points to a housing aspiration where the internal and outdoor spaces are manageable, and represents a financial benefit.”

So it’s not so much about downsizing, as it is about “rightsizing” - that is finding a home more suitable for your current life needs. In fact, the research revealed that nearly two thirds of those surveyed, who had already downsized, still had at least one extra bedroom.

What are the advantages of downsizing?

While there may be any number of reasons to move after retirement, the report found that lifestyle, finances and having less space to maintain are the biggest motivators when it comes to packing up and moving out.

Less space equals less areas to clean and make presentable. Less sinks and taps should mean less water used and lower water bills, while less rooms means less lights and heating and cheaper electricity bills.

RELATED ARTICLE: How to save up a nest egg and reduce stress about retirement finances

What does downsizing entail?

Now that you’ve made the decision to look for somewhere a little more compact, the logical next step is to sell your current property and start house hunting anew.

Of course, as with most things in life it really isn’t that simple. Not only is moving an arduous task, but there are a few things to keep in mind when selling up and buying post-retirement age.

1. What comes first, buying or selling?

This is a question that will apply no matter what age you are, and there’s no one-size-fits-all solution. That said, there are pros and cons to both.

If you sell first you’ll have money upfront to pay for your new place, which means you won’t have to worry about depleting your savings for a deposit.

Of course on the flipside of that, if you sell up before finding a new place, you’ll need to find somewhere to store your stuff in the interim, and you’ll want to make sure you’ve got temporary accommodation sorted out, preferably without squandering your money on rent.

Check out our guide, Sell or buy, which to do first? for more information on the process of selling your home and buying a new one.

2. Will I need a home loan?

Whether you’ll need to take out a home loan or not will depend on your individual finances. If you decide to sell up first and buy a place with a lower price tag, you may be able to avoid borrowing money. Or, if you just need an extra bit of cash to see you through the buying and selling stage, you could potentially use a bridging loan to see you through.

If your dream home or apartment is more than the selling price of your current place, then you may have to take out a home loan to tide you over. Of course, if you’ve just sold then you’ll probably have a bigger deposit to put down, meaning a much lower loan to value ratio and the ability to snag a more competitive interest rate. 

RELATED ARTICLE: 3 new home loan rates refinancers need to know about

3. Can I take out a home loan as a mature borrower?

The answer is yes, but you may be limited as to which providers will lend to you and you may not be able to get a loan with the best interest rate. 

Over the age of 55 most lenders will require you to provide a written exit strategy. This will usually include evidence of your superannuation and the value of other assets that can be sold off to cover your loan, such as investment properties or any shares you may hold. Lenders may also require you to provide an exit strategy, if you will be more than 75 years of age by the end of the loan term.

Just keep in mind each lender may have slightly different rules, so it’s worth checking in with them on your eligibility.

So, thinking about taking out a home loan to finance your next big life adventure? Why not head to Mozo’s home loans comparison page to see what’s out there or, take a look at the loans and interest rates on offer below.

Compare home loan interest rates - rates updated daily

Search promoted home loans below or do a full Mozo database search. Advertiser disclosure.
  • placeholder
    Mozo Experts Choice 2021
    Smart Booster Home Loan

    1 Year Discounted Variable Rate, Owner Occupier, Principal & Interest, <80% LVR

    interest rate
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    Initial monthly repayment
    1.99% p.a.variable for 12 months and then 2.48% p.a. variable
    2.47% p.a.

    A super low introductory rate home loan with no monthly or ongoing fees. Unlimited free redraws and unlimited additional repayments to help you build your equity and own your home sooner. Multiple loan splits available. (Rates revert after introductory period ends). 20% minimum deposit required. Winner of two Mozo Expert's Choice Awards for 2021.

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    UHomeLoan

    Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.85% p.a.
    fixed 3 years
    2.24% p.a.

    $0 fees and easy application. Choose between weekly, fortnightly or monthly repayments. 3 year fixed rates are for new Owner Occupier Principal & Interest loans.

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    Mozo Experts Choice 2021
    Celebrate Variable Home Loan

    <60% LVR, Owner Occupier, Principal & Interest

    interest rate
    comparison rate
    Initial monthly repayment
    1.99% p.a. variable
    1.99% p.a.

    Fast and efficient online application. Automatic discounts as loan is paid off. Free extra repayments and redraw facility. Zero fees to consider. Min 40% deposit required. Winner of three Mozo Expert's Choice Awards for 2021.

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    Basic Home Loan

    Fixed, Owner Occupier, Principal & Interest, LVR 70-80%

    interest rate
    comparison rate
    Initial monthly repayment
    2.09% p.a.
    fixed 2 years
    2.44% p.a.

    Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.

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    Fixed Rate Loan with Orange Advantage

    Owner Occupiers, Principal & Interest, LVR <80%

    interest rate
    comparison rate
    Initial monthly repayment
    2.04% p.a.
    fixed 3 years
    3.60% p.a.

    Know exactly what your repayments will be, and you can fix your rate for up to 5 years. No monthly, annual fee or transaction fees.

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*WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

**Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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