Moving to a larger house is not the only time that things can change with your home and mortgage. Sometimes there comes a point when owning a home becomes a little too much to handle. Perhaps your children have moved out and you no longer need those three extra bedrooms. Whatever the reason, downsizing is a great option when you no longer need a full-size home. Perhaps you want to swap your two-story family home for a rancher, a townhome or a cute little apartment! There are many options for people wanting to scale down.

Homeowners who are fortunate enough to now be mortgage-free and looking to downsize could be sitting on a gold mine!

Breaking Your Current Mortgage

If you do still owe on your current mortgage, it is important to remember that downsizing during your current mortgage cycle, will be breaking the mortgage. This means that you will be required to go through the entire qualification process again – including passing the stress test. The stress test is now required for all mortgages. Its purpose is to determine whether a homebuyer can afford the principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from the Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

Regardless of your current situation, there are some costs that go with selling your existing home and moving to something smaller or more affordable.

Costs Associated With Downsizing

• Realtor commission fees (typically 2.5 to 5% of the home selling price)
• Closing costs and legal fees (1 to 4% of the purchase price on the new home)
• Miscellaneous costs such as moving expenses, upgrading appliances or buying new furniture
• If you are moving into a condominium or townhouse there are strata fees to consider