Downsizing releases more money. A reverse mortgage lets you keep the house. Almost everyone knows both of those things, and almost nobody runs the actual numbers before deciding, because the decision is usually made on feeling.
The feeling matters. But it helps to know what it costs.
What Downsizing Costs Once Agent Fees And Moving Are Counted
Take a $1.2 million family home in Glenfield and a $780,000 townhouse in Albany as the replacement. On paper the difference is $420,000.
In practice:
- Agent commission on a $1.2 million sale in Auckland typically runs $35,000 to $45,000 including GST, depending on the agency and what you negotiate.
- Marketing, staging and a pre-sale tidy-up often add $5,000 to $15,000.
- Legal fees on both the sale and the purchase, around $3,000 to $5,000.
- Moving, storage and the hundred small purchases a new place demands, easily $10,000.
- Body corporate fees if the townhouse is a unit title, often $3,000 to $6,000 a year, which is a new ongoing cost.
Realistic cash released: somewhere between $340,000 and $360,000, with no interest attached to it and no debt on the new home.
That is still a large sum, and it is the strongest argument for downsizing. The money is yours outright.
What A Reverse Mortgage Costs Over The Same Period
Suppose instead you stay in Glenfield and borrow $150,000 for the same purposes, at 8.25 percent, drawn as $50,000 up front and the rest in a reserve used over five years.
After ten years the balance is in the region of $280,000 to $300,000, depending on exactly when the reserve was drawn. If the house has grown at 3 percent a year it is worth about $1.6 million by then, so there is more equity in dollar terms than you started with, but the loan has consumed around 18 percent of the home’s value. The set-up costs are small by comparison: roughly $920 arrangement fee, a valuation, your solicitor and a $55 equity protection fee if you choose that option.
So the reverse mortgage gives you less money and costs you compounding interest, in exchange for not moving.
Staying Near Family, Doctors And Routine
This is where the decision is really made, and it deserves to be taken seriously rather than treated as sentiment.
Moving in your seventies means a new GP, a new pharmacy, a new supermarket layout, new neighbours who do not know you, and often a longer drive for the children who visit. Research on older adults consistently finds that staying in a familiar home and neighbourhood supports wellbeing and independence for longer. The move itself is also physically and emotionally taxing in a way that is easy to underestimate at 72 and impossible to ignore at 82.
A smaller, newer, warmer home has real advantages too: fewer stairs, less garden, lower heating bills, less maintenance to pay someone else to do. For some people the townhouse is a better place to grow old than the family home ever was.
Neither answer is wrong. The point is to be honest about which one you are choosing and why.
When Downsizing Wins
- You need a large sum, well beyond what age-based borrowing limits allow.
- The house is too big, too cold or too much work, and you would move anyway within a few years.
- You want to leave as much as possible to the children, with no debt attached.
- There is a suitable smaller home in the same area, so the social cost of moving is low.
- A retirement village is the eventual plan and you would rather make one move than two.
When Staying Put Wins
- The amount you need is modest: a roof, a car, a few thousand a year on top of Super.
- The house works for you and is likely to for another decade.
- Family, friends and health care are all within a short distance.
- The thought of selling makes you feel ill, which is a legitimate data point.
- Property values in your area are rising faster than the interest rate, which has been true across much of Auckland in most decades, though not all years.
Running Both Numbers Before You Decide
The mistake is to decide first and justify afterwards. The better approach is to put both options on one page with real figures: the likely sale price, the real cost of selling, the price of the smaller home, the borrowing limit at your age, the balance in ten years, and what each path leaves for the family.
That is a two-page document I prepare for clients who are weighing exactly this choice, usually with an adult child in the room. Some go on to downsize, and I say so when that is the better option. Others borrow a modest amount and stay. If you want it worked through for your own situation, book a chat and bring a rough idea of what the house is worth.
