Is selling your home a good idea, or should you hang onto it?
Upsizing & Downsizing
Real estate typically represents a significant portion of most Canadian homeowners’ wealth. According to statistics, the average Canadian has nearly one-third of their net worth tied up in real estate! With property sales being so profitable, it might be tempting to let go of – and cash in on – your greatest asset. But how do you know if selling your home actually makes good sense?
Ideas by SashaW
There are many factors that come into play when deciding whether to sell now or wait. One of these factors is financial. Assuming you plan to buy another house immediately, you could either be down-sizing or up-sizing from your current home. Presuming that interest rates are the same for your current mortgage as they will be for your new one, if you’re downsizing to a condo or a less expensive home, it often makes sense to begin the process right away rather than waiting for the best possible sale conditions. Why? Because while you wait for a seller’s market, you are continually paying those higher monthly costs for mortgage P&I, utilities and taxes – instead of moving into the less expensive home and reducing your living expenses right away.
When trading up to a nicer/bigger/better located home (a.k.a. upsizing) you lock in the equity-appreciation on a bigger investment, with a smaller payment than if you wait – because while your own home is appreciating in value, netting you a profit at sale-time, that more expensive property is also going up in value. Waiting might even put your dream home out of reach altogether. By moving up now, you also get the intangible benefits of enjoying life in a nicer home right now. The bottom line is that whether your home’s current value is lower or higher than a year ago isn't very relevant to the decision of whether to sell or not. Sell your home if the time seems right, and as long as you're investing straight into another house – whether you’re heading in a more lavish or a more modest direction – you'll do just fine.
Checklist: Sell, Rent, or Borrow?
When is it the right decision – not just from a financial standpoint, but all things considered – to sell your Toronto home? Of course, there’s no one right answer for everyone, but there are questions you can answer that will help you decide.
Selling your home may make sense if one or more of these statements apply to you:
- I am ready to move to a smaller/larger home
- I am ready to move to a specific area that better suits my changing lifestyle
- I am prepared to rent instead of own, so I won’t have to worry about repairs or property taxes
- I have extra property that I no longer need or don’t want to maintain
Renting your home out for income may make sense if one or more of these statements apply to you:
- I have extra property that I can rent out for all or part of the year and I don’t mind the responsibilities of being a landlord
- I have extra space that I don’t mind renting out, such as a room I could rent to a friend, a basement, or a legal, separate apartment
- I have the right kind of space and am well-located enough to set up a bed and breakfast, and I enjoy playing host and meeting new people
Borrowing (by re-financing your mortgage or through other loan products), rather than selling or renting, may make sense if one or more of these statements applies to you:
- I don’t want to move or rent out my property, but I need money to pay off debts, bills, or conduct needed home repairs
- I have paid off all or part of my mortgage
- I can afford to carry a reverse mortgage or some other form of debt
- I am not worried about taking the money away from my estate