The Real Cost of Downsizing: Why Moving to a Smaller Home Doesn’t Always Mean Smaller Expenses

For many, downsizing may be a smart financial move. Many people choose to move from a larger family home to a smaller condo or townhouse with the goal of reducing costs and simplifying their lives. On the surface, this makes sense. After all, less space should mean lower expenses. But the reality is more complex. While downsizing can bring benefits, it doesn’t always translate into savings.

Let’s take a closer look at the hidden costs of downsizing and what to consider before making the move.

Transaction Costs Add Up

One of the most overlooked expenses in downsizing is the cost of selling and buying property. Realtor commissions, legal fees, land transfer taxes, and moving costs can eat up a significant portion of any equity you free up by selling your home.

For example, the land transfer tax alone can run into the tens of thousands of dollars. Every province is different, but in Toronto, the Municipal Land Transfer Tax for a residence between $400,000 and $2,000,000 is 2 percent.¹

Add in staging, inspection, and appraisal fees, and you may find that the upfront expenses of downsizing outweigh the monthly savings.

Condo Living Isn’t Always Cheaper

Many retirees and empty nesters move from a detached home to a condo, assuming it will be more affordable. But while you may spend less on utilities and property taxes, condo fees can be surprisingly high (and they tend to rise over time). They range from about $0.30 to $0.85 per square foot, depending on where you live, which could equate to nearly $700/month for an 800-square-foot condo.²

Condo fees cover maintenance of shared spaces, building insurance, and contributions to a reserve fund. If the building is older, you may also face special assessments for major repairs. These costs can make condo living as expensive, or even more expensive, than staying in your current home.

Renovations and Furnishings Can Be Costly

Even if you’re moving to a smaller place, chances are you’ll need to make updates to suit your lifestyle. Whether it’s renovating a dated kitchen, upgrading appliances, or investing in smaller furniture, these costs can quickly add up. Downsizing can also mean paying for storage if you’re not ready to part with certain belongings that you can’t fit in your smaller home.

Higher Cost Per Square Foot

Smaller doesn’t always mean cheaper when it comes to real estate. In many cities, condos and townhouses can actually cost more per square foot than detached homes. That means you may be giving up space without seeing a proportional drop in your mortgage or purchase price.

Ongoing Maintenance Surprises

Even in a smaller property, unexpected expenses still come up. Condos may require special assessments for major repairs, while smaller detached homes can still face costly roof, plumbing, or HVAC replacements. These ongoing maintenance surprises mean that downsizing doesn’t shield you from the financial realities of homeownership.

Downsizing can still make sense in many situations, especially if your current home is too large to maintain or if the proceeds from the sale can significantly improve your retirement security. But it’s important to consider all of the financial factors as you go into the process.

Rather than assuming a smaller home automatically equals smaller expenses, take the time to map out all the costs involved, from taxes and fees to condo charges and renovations. Consulting with a financial professional and running the numbers can help ensure your decision supports both your lifestyle and long-term financial objectives.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.