There is a time when downsizing your house can be the best thing that you can do for your finances. It could be beneficial when it comes to reducing the cost of owning a home before you end up in the red. However, before you decide to take out the finances that will help you downsize to a home that is within your financial reach there are a few things that you need to consider.
When it is the right time to downsize your home?
There are many reasons why downsizing can be the route to go. Downsizing can offer you and your finances the break that you have been looking for. For example, if you are using more than 30% of your income to pay off your mortgage or rent, your children have left the nest, or you have realised that the amount you are paying on your mortgage is more than the value of the house. This could be the time to consider downsizing, but it is important that you assess your options before doing so.
The cost of maintaining and repairing your house is climbing
Maintaining and repairing your house is an important part of increasing the value of your home. However, if you find that your home is costing you in out of pocket expenses when it comes to maintenance and repairs then you will need to consider letting it go.
The general rule of thumb is that the cost of repairs and maintenance should not exceed 1% to 4% of the property’s value on annual upkeep. If you find that there is a year on year increase that exceeds these percentages then maybe it’s time to move to a smaller house.
Thinking about your finances is essential
You can achieve downsizing by applying for a home loan or by using the equity in your home to finance your property. If you are considering taking out a home loan it is vital that you check the requirements. Finding a lender that will be able to assist your situation is also important, but most of all knowing how you are going to pay off your home loan is key. Speaking to a financial advisor or broker on what will be the best route to go can save you time and money.
Create security before you sell off your home
The property market in Australia is diverse, and at times, a complex one. Taking on a new house before your current home is sold can be a risky business. You could consider a bridging loan which can help ease you into your new home without jeopardising your finances as you wait to sell off your previous
home. However, it is important that you check whether a bridging loan will be suitable for your situation. You could find that being patient can help solve your problem.
Always keep in mind that you are better off not to sell your house in a panic, but also don’t waste too much time by not selling when the market is a buyers’ market.