Why Downsizing Doesn't Always Upsize Your Bank Account 🏡 ↘️ 💰

Downsizing no longer guarantees you will release equity from your current home…

In today’s market, downsizing no longer guarantees you will release equity from your current home. Before we understand why, let’s first clarify what exactly is downsizing and equity.

Downsizing, as the name implies, traditionally means selling your current home to buy something, more modest/less expensive and pocketing the difference.

Equity refers to the fair market value of your home, if you were to sell tomorrow, less any outstanding mortgage, or other loan(s), secured against your home that you owe.


So why wouldn’t downsizing necessarily give you that influx of cash into your bank account to spend as you wish?

You know the saying, ‘less is more’...

Who knew that would ever be applicable to property. In today’s market, especially in certain metropolitan and coastal postcodes around Sydney and Melbourne, downsizing from a 4-bedroom house to a 3-bedroom apartment for example, doesn’t always equal a cash positive position. Once you’ve factored in often forgot about expenses such as stamp-duty, strata fees, and removalists, the comparable price of apartments to houses in today’s real estate market can sometimes mean downsizing is simply not worth the financial and emotional stress.

4 Bedroom House in Randwick; $1,650,000

4 Bedroom House in Randwick; $1,650,000

Source: realestate.com.au (valuations accurate as of January 2019)

3 Bedroom Apartment in Randwick; $1,500,000

3 Bedroom Apartment in Randwick; $1,500,000

What other options do I have…

If downsizing is not the right option for you, or simply doesn’t make financial sense, you may want to consider releasing equity from your home.

Equity release refers to range of products letting you access the equity (cash) tied up in your home (if you are over the age of 55), without moving.

Equity release products such as reverse mortgages and home equity loans have got a bad rap, and rightly so in some cases. EquiKey exists to set the record straight on these bad actors and prices your equity upfront, for investors and prospective homebuyers to buy. You can see who’s bidding on your equity and choose which bid to accept. Unlike a reverse mortgage or home equity loan, there is no debt to pay back when you sell your home, so whether you live in it for another 2 or 20 years, you will always retain 100% of whatever share you haven’t sold. You can find out more about Equikey and how we differ to a reverse mortgage here.

If you have any further questions you can contact us or check out our FAQ page.

Whether considering downsizing or equity release, EquiKey recommends speaking with a financial advisor or lawyer to fully understand how each may effect your unique circumstances. If you’re unsure where to go for this advice, just ask, and EquiKey can refer you to an independent advisor near you. EquiKey is a marketplace and does not offer any financial or legal advice or services.