Your children have moved out and you’re approaching retirement. Is the house starting to feel too big? For future retirees, wanting to downsize to a smaller home is practically a rite of passage—and there are many housing options. But be careful: Whether you’re considering a small condo without a yard to tend to or an intergenerational home with your children (and your grandchildren, of course!), you need to weigh the pros and cons for each possibility. Here’s an overview.
This is a very popular trend. Often people want to sell their house and buy a condo because they want a home that requires less maintenance and that is less expensive. Accustomed to comfort and quality when it comes to real estate, new retirees will generally opt for a home that’s smaller, but no less luxurious.
This option has its share of benefits. Condos require less upkeep than houses. The maintenance of common areas is shared among the building’s residents. Condo fees in particular are used to hire professionals to care for these community spaces.
Many condo buildings offer a slew of amenities that make life easier by saving you a trip, like indoor parking, urban rooftop chalets, a pool, a surveillance system and a gym. New constructions are soundproof and provide enough privacy for all residents.
But beware: Moving from a big house to a small condo can also be challenging. Home prices and condo fees have soared. And properties are getting smaller and smaller. Having to inevitably compromise on the amount of living space, which is much smaller compared to a house, can be difficult to accept for some people.
“I think you have to ask yourself the right questions before you downsize to a smaller home,” says Mohamed Wakkak, Financial Planner at National Bank. “Are you selling your house to make a profit that you will then invest? Will selling your house generate supplemental income that will help you reach your retirement goals? If you include condo fees and other expenses, will it cost more for you per month? Do you have the means to buy a condo downtown, for example? You also have to be ready to compromise on the size and the location of the condo.”
“If your investments have decreased in value in the last few months and that’s what’s making you want to move into a smaller home, I suggest you be patient,” asserts Thierry Desmarais, product manager, personal financing solutions at National Bank. “Sometimes it’s hard, but you have to leave your emotions at the door. If you have a balanced portfolio, there’s a strong chance that your investments will regain their value within a few years. Usually, property shouldn’t be the core of a retirement investment strategy.”
“That being said, if you really want to move into a smaller home, go for it. The real-estate market is stable for now and it’s still a seller’s market. No one knows what the market will look like in a few months. Recent reports foresee a decrease in prices, but you can’t predict the future. Discuss your goals with your advisor so you can review your financial plan for your retirement, especially if you’ll make a profit after selling your property.”
Some retirees want to leave the big city and move to a small town. Others are tempted to live in their second home full-time, compared to when they used it as a cottage during their working life. Away from the big city, life is often more peaceful. And properties are more spacious than what you’ll find in the city or even in the suburbs. The cost of living also generally isn’t as high.
Nevertheless, you’ll still need to find the time and keep in shape for tasks like shovelling snow and groundskeeping. Otherwise, you’ll have to set aside enough money to delegate these tasks to professionals. If you need to go anywhere, most often you’ll need a car. Your children will probably live far away, so you may have fewer opportunities to spend time with the family.
According to Wakkak, this option requires some thought as to your lifestyle. “Will you get bored out in the country? If you’re thinking of selling your city home and moving to a small town, are you aware of all the expenses involved, like the purchase of a second car for your partner?”
An intergenerational home—also known as a multigenerational or a bigenerational home—is a single-family home that allows parents and children to live together. If you prefer a bit more independence, sharing a duplex or a triplex with your family may be more tempting.
Ah, a chance to spend more time with the family! The main draw for duplexes and intergenerational homes is being close to one’s children and grandchildren. Retirees can babysit, reducing the amount of time the grandchildren are spending in pre-school or daycare. It allows the parents to save… and the grandparents to spend quality time with the little ones. This kind of property leaves the door open to having a home with a backyard, unlike most new condominiums being built.
However, intergenerational homes do have a few drawbacks. Municipalities don’t all have the same regulations pertaining to intergenerational homes. Some cities, for example, have restrictions on the surface area of your second home. Others require that the dwellings share common spaces or be separated by a shared firewall. You need to take the time to seek advice from your notary and real-estate agent. Reselling an intergenerational home will take relatively more time compared to reselling a duplex. These two types of homes can be quite expensive, not to mention they may require more maintenance and renovations.
“You need to be very careful with this kind of property from a legal point of view,” warns Wakkak. “If the parents and the children are all co-owners of the house, then everyone is responsible for paying the mortgage collectively. What happens if one of your children doesn’t pay their share? Will that have an impact on your budget? It’s strongly recommended that you speak with your notary and your advisor before buying this kind of home.”
Some snowbirds are quick to pack their bags and move abroad in their old age. Seaside houses or condos still require a good deal of thought, however. Even more so today, given the current situation.
Even when things get back to normal, keep in mind this is an option for well-informed people only. Living abroad requires very rigorous research and financial planning. You’ll have to juggle many different immigration and tax laws. Speak with a subject matter expert if you go this route.
The annual length of your stays abroad is an important factor to consider if you want to maintain non-resident status in the country you move to. Tax laws vary from one country to the next, which is why it’s important to speak with a subject matter expert. “You can enjoy the sun and still keep your home in Canada,” tempers Wakkak. However, if you decide to leave the country and live abroad permanently, you’ll have to consider the tax consequences of leaving. You need to know the laws and regulations that affect your arrival, buying property and getting health coverage. It’s important to prepare early and to meet with experts who will be able to guide you.”
Even if you’re currently healthy, no one can predict what the future holds. Whether you decide on a condo or a country cottage, health concerns may one day lead you to question your type of home.
Keep in mind that you and your partner may need to live in a long-term care home (LCTH) due to health issues. Concerning this last option, here are a few guidelines to help you estimate the financial impact. Also, remember that there are home assistance programs for retirees that help to ease the cost of these types of centres. Whether you prefer staying home or moving, learn about the shelter allowance program offered by Revenu Québec.
In the end, regardless of the type of house you’re picturing—condo, cottage, intergenerational home or pied-à-terre in the sun—the important thing is to meet with experts to ensure you’re well prepared. That way, you’ll do everything you can to ensure your life’s adventure is a complete success. You can’t put a price on peace of mind in your new home.
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