According to the FNB Estate Agents Survey for Q1 2019, 15.9 per cent of sellers attributed their reason for selling and downscaling due to financial pressure.
“When it comes to financial stress, downsizing is often a forced decision that homeowners reluctantly make to keep up with the rising costs of living. However, as tough as it might be, homeowners stand a much better chance of recouping their losses and bolstering their financial position if they sell before they start falling behind on their bond repayments,” said Adrian Goslett, from RE/MAX.
Understanding that this is not always an easy decision to make, Goslett offered his insights into some of the pros and cons to making this decision.
Read: Overpricing your home hurts more than it helps
Con: Hidden costs
Homeowners need to be prepared for the unexpected costs involved in a sale before they make this decision. Before going ahead with the sale, subtract commission fees, bond registration and cancellation fees, as well as advanced payments of municipal accounts from your selling price for a realistic view on what you will get out of the sale of your current property. Doing this calculation can help you determine whether the profit from the sale will be enough to cover as many of your other debts as you initially hoped it would.
Pro: Lower monthly instalments
The true saving in downsizing is not necessarily the profit from the sale, but what homeowners stand to save on their monthly home loan repayments. You might not get as much out of the sale, but you will have more disposable income in your budget each month to help you pay off or avoid getting into other debt.
Pro and con: Less space
Another important factor is the space you stand to lose when downsizing. Apart from the adjustment you will need to make when living in a smaller space, you might also need to factor in purchasing new furniture that will fit into the tighter living quarters – bearing in mind that you can sell your existing furniture to recoup some of these costs. However, having a smaller space also means that your electricity and water bills are likely to be much lower. If you had a large garden, you will also save on the costs of garden maintenance.
• Information supplied by Private Property.
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