Unlock vs Downsize

Equity Release vs "Downsizing"

In Australia it has become conventional wisdom that senior homeowners must sell the family home and move to a small dwelling to free up home equity to help with the cost of retirement living.

But many senior homeowners have been surprised to learn they can unlock savings and remain in the family home for life by taking advantage of equity release.

Equity Release has a cost, but is surprisingly competitive when add up all of costs of downsizing - selling agent’s fees, moving fees, and the many fees and taxes associated with the purchase of a smaller dwelling.

These costs need to be weighed against the amount of equity you will actually still have in your hands after purchasing your new dwelling.

It is also important to consider the quality of the asset you are exchanging in a typical down-size. The family home is usually on a good-sized block and is strongly underpinned by the value of the land. The typical down-sized dwelling, whether it is a townhouse, a retirement unit or an apartment, has a much smaller component of land value and is therefore likely to be a lesser quality investment over the long term.

For the vast majority of senior homeowners, the biggest benefit of remaining in the family home is not financial; it’s the social and emotional wellbeing of staying in the home you love in your own community.

Downsizing is certainly the preference of some senior homeowners, but isn’t it good to know that equity release means you don’t have to sell the family home to live a good life in retirement?