Should I buy a smaller home?

Advice

The shift to a smaller home often coincides with pre-retirement or retirement. If this is your scenario, investigate your options with a Yellow Brick Road Financial Planner before committing to a plan. The equity in your family home is tax-exempt when you sell the asset but there are many tax implications in superannuation and other investments that should be discussed with an expert. There may be many tax-friendly ways to move to a smaller home, and you should know what they are before making a move.

Investment property

The proceeds from the sale of a large, family home can be large enough to not only buy a smaller home out-right, but also to fund an investment property for the future. If you sell the family home before you retire, and you are still earning income, you can use a Yellow Brick Road Rate Smasher or Empower home loan to buy an investment property that provides income when you retire. If the funds from the sale of your family home are not enough to buy a new home out right, you can borrow with a low-interest home loan such as the Yellow Brick Road Rate Smasher.

Investments

When selling a family home, a lot of equity can be realised in cash. A certain amount of this will be used to purchase a smaller home, ideally debt-free. But that probably leaves surplus cash which can be reinvested in assets that can produce income in retirement. Consider these options, with advice from a Yellow Brick Road Financial Planner:

Retire Right: Yellow Brick Road’s superannuation fund which combines low fees (0.76 % management fee) with flexibility of investment option, excellent life insurance options and quality investment managers.

Smarter Money: Yellow Brick Road’s cash- and fixed-interest-based investment fund, which to-date had outperformed its peers while adhering to a system that mitigates downside risk. With a choice of the Active Cash and Higher Income funds.

Cash Manager: a high-interest account with the government’s $250,000 capital guarantee (year to Dec 2014 return = 4.1%). Excellent for holding cash before making an investment, and a popular central bank account for Self Managed Superannuation Finds (SMSFs), because of its advanced reporting options.

Term Deposit: high rates of interest and government-guaranteed capital to $250,000. Minimum deposits are $10,000 and not only are the YBR Term Deposits able to be bought and managed in an online account, but they are SMSF-ready.

Downsizing your home can happen at a point in your life when good decisions about tax, investments and transition to retirement are crucial. Start your journey with a visit to a Yellow Brick Road Financial Planner.