We took the plunge and sold our large family home to move to a condo apartment. People who know us were surprised – and even aghast – that we would even consider an apartment.

We were surprised too as it was not exactly on our list of preferred types of residence.  But when we went for a showing, my husband and I looked at each other and knew that this was it!

Funny how things turn out.

Should you sell the family home?

This post was originally published in July, 2011

After retirement, where you live is one of the biggest decisions you will make.  Should you stay in the same house you raised your family?  If you sell the family home should you downsize to something less expensive and invest the difference?

For a time we were thinking of selling our house and purchasing a 40-foot motor home.  We had visions of travelling all over North America and settling down for the winter in some nice balmy area.  We checked out motor homes and visited all kinds of websites devoted to the travelling lifestyle – everything from good camping spots to how to cook gourmet meals on your grill.

Once we realized this would involve a bit too much togetherness, not to mention how our three cats would handle it, we soon scotched that idea.

There are a lot of arguments for owning your own home.  For one, it’s a safety net.  Notwithstanding the recent downturn in the real estate market, a house is still one of the best investments you can own.

Downsizing Your Home

A lot of people decide to sell their large family home and buy something less expensive, whether it’s just less square footage, or a condo townhouse or apartment.  Several of my friends have done this and consider it to be the best move they’ve made.  On the other hand, when I consider this, I like the space of a larger house.

  • I’ve turned the extra bedrooms into an office and a sewing room
  • I have a dining room for family dinners and entertaining
  • I have a large basement that the grandkids can play in (once I get it organized)
  • I have the space for relatives to stay over when they visit
  • My husband and I – and the cats – have lots of space to do our own thing (see the motor home issue above)

Another disadvantage when considering downsizing is that even a smaller house will not cost that much less than the one I have now, either in price or monthly expenses, so there would be no “difference” to invest.

Mortgage or Clear Title?

The next question is whether or not to pay off the mortgage.  One rule of thumb is if the interest rate on your mortgage is less than what your investment portfolio is earning, you’re probably better off keeping the mortgage.

The flip side is that your mortgage is probably your largest single monthly expense, and by paying off your home you lower your monthly expenses significantly.  In fact, the goal of the majority of Canadian homeowners is to pay off their mortgage as soon as possible.

Tax Considerations

Canadian taxpayers are allowed one primary residence so any gain realized on the sale of the house is excluded from your income.  So, again, your home can be an excellent investment for the long term.

So, we’ll stay put for the time being.  However, I’m still perusing the MLS listings on a regular basis in the hopes of finding my dream retirement home.

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15 Comments

  1. Ross Taylor on July 14, 2011 at 6:35 am

    I can see the attraction of an RV or trailer home, but unlike regular homes, these things just go down in value and don’t last forever, so I would not endorse one as a permanent residence solution

    • Boomer on July 14, 2011 at 3:05 pm

      @Ross Taylor
      We also came to that conclusion. We bought our current house 15 years ago and it has almost tripled in value so we definitely won’t lose when we eventually sell.

  2. Angelo on July 14, 2011 at 7:05 am

    I’m not really certain that a home is all that good an investment, in the strict sense of the word (i.e., a position that increases in value over time).

    As you pointed out in your article, you won’t save much by downsizing to a smaller home — that’s because while home values increase over the long term, they don’t necessarily outperform the housing market, unless you a) only buy in a down market and sell in an up market, and/or b) you are speculating on poorer neighbourhoods become gentrified or ‘hip’ (e.g.: Plateau Mont-Royal in Montreal) and thus increasing in value.

    You make good point about enjoying the extra space that you get with a house (although it does bring to mind your earlier Wants vs Needs article), but I think it’s a little bit of a stretch to call your primary residence an investment.

    • Boomer on July 14, 2011 at 3:15 pm

      @Angelo
      Our house has been a good investment as we were lucky to have purchased at the lowest point in real estate prices here in about 20 years. However, if we sell now we won’t recoup the difference if we buy another house right away, we’ll be spending it so you’re right – there is no real monetary investment value unless we decide to rent instead.
      As for the “Wants vs Needs” article, we did need the space when we initially purchased, we wouldn’t buy a huge house now.

      • Angelo on July 14, 2011 at 3:25 pm

        Of course, and that’s part of the story of home ownership — your needs change over the course of time. Small homes get outgrown. Large homes are eventually too big.

        Make certain that it is a safe and loving environment for your family. That’s all that matters. 🙂

  3. My Own Advisor on July 14, 2011 at 7:54 am

    Geez, tough call Boomer, because it depends on so many factors…some of those you have included above.

    I’m “not there yet” but years from now, that might be a tough decision for us.

    You made an interesting point about paying off the mortgage, re: rule of thumb. My take on this: always do both (pay down mortgage and add to your portfolio) unless rates on your mortgage are significantly higher than your portfolio return; say > 2%. Then, focusing on mortgage paydown over portfolio building is a no-brainer.

  4. krantcents on July 14, 2011 at 8:38 am

    When our children graduated college some fourteen years ago, we downsized from a 5 Bedroom 3 Bath home to a 2 Bedroom & Den 2.5 Bath townhouse. The difference went into savings. No regrets!

    • Boomer on July 14, 2011 at 3:18 pm

      @krantcents
      I would consider a similar move if we could indeed realize some savings but in our current housing market I don’t find that to be the case.

  5. Cassie on July 14, 2011 at 10:45 am

    Downsizing is something we consider occasionally as well. Our home is paid for but taxes, insurance and maintenance costs and time remain high. We could reduce these and utilities costs by cutting our sq footage. What stops us is the frequent visits by family. We love having them and it just wouldn’t be the same if we put them up at a hotel.

    • Boomer on July 15, 2011 at 4:42 pm

      @Cassie
      I try to weigh the pros and cons of each scenario but right now they come up pretty equal – reduce costs or reduce space. I’m still undecided.

  6. william on November 8, 2012 at 6:30 am

    Downsizing is something we consider occasionally as well. Our home is paid for but taxes, insurance and maintenance costs and time remain high. We could reduce these and ut

  7. Scott on July 2, 2014 at 5:34 am

    You mentioned an important one Cassie. Time! All the above make sense but the other biggie in favour of downsizing is the endless honey-do jar of jobs that comes with a bigger place

  8. Dan @ Our Big Fat Wallet on July 2, 2014 at 1:49 pm

    I can definitely see downsizing from a house to an apartment. One of my relatives did that after retiring and loves it. She now has much more time to travel and spends little/no time on maintenance – something that became more and more difficult with age. Now she leaves her condo for most of the winter and heads down to Arizona

  9. Keith Charles Cowan on July 3, 2014 at 1:19 pm

    People have mentioned time as a differentiator for a large house versus small. There is also the premium you must pay in housecleaning and heating a larger home. Plus higher taxes.

    Another thing is all the stuff you have the privilege of keeping until your heirs get rid of it all. A friend just died at age 70 and her executor has to focus on three floors of townhouse totally loaded with stuff.

    We believe in living with a light touch on our environment. But we have many friends who wear their large homes as albatrosses around their necks.

    Be honest with yourselves. Inertia is what keeps you there.

    The smaller house cost more because they are energy efficient and everything is new. No copper pipe not aluminum wires. No asphalt shingles or asphalt driveways.

  10. Joy on September 17, 2014 at 6:57 am

    We sold our large home this summer. We are now renting a small bungalow. We are in our early sixties. It was a lot of work downsizing and getting rid of 40 years of ‘stuff’ – but we didn’t want to dump that responsibilty on our kids. I would imagine that the whole job of downsizing would be more difficult as we get older – so we think it was a good plan. I think most people stay where they are because it is too overwhelming to do anything else.. At this point we don’t expect to own a home again – we plan on being renters. After you get over the mentality of ‘having’ to own a home, the whole concept of being a renter is very freeing. Plus we have the bonus of almost 40 years investment in real estate – now as a cash asset. Our lawyer said what we are doing is ‘unconventional’ I kind of like being ‘unconventional’. Time to re-invent our lives!

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