The Financial Guide to Downsizing

Why the Financial Picture Matters Before You List

Many people list their homes without understanding the financial outcome. Then they're surprised when they realize what they actually net, what it means for their budget, or how it affects their government benefits.

You should understand:

• What your home will likely sell for (based on market value, not sentiment)
• What you'll actually net after costs (commission, legal, repairs, staging)
• What the next home will cost — purchase price, closing costs, ongoing expenses
• Whether there's a gap you'll need to cover with other savings, or a surplus you'll need to place
• How a large sale affects your taxes and government benefits in the year it happens

Have this conversation BEFORE you list. It's not binding, but it's informed. It prevents bad surprises.

What Your Home Is Actually Worth

Three different numbers:

• Assessed value: What the city says your home is worth for property tax purposes. Typically lower than market value
• What you paid for it: Irrelevant to today's market, but easy to fixate on
• Market value: What an actual buyer will pay today. This is what matters

The only number that counts is market value. Get a Comparative Market Analysis from a local REALTOR®. This looks at recent comparable sales (homes like yours that have sold recently) and gives a realistic picture of what your home is worth.

This number may be higher than you expect, or lower. Either way, it's data. Use it to make decisions, not emotion.

The Net Proceeds Calculation

Starting with market value, subtract costs:

• Real estate commission: Typically 3.5–5% in Calgary (negotiable). On a $600,000 sale at 4%, that's $24,000
• Legal fees: $800–$1,500 for the lawyer handling closing
• Property taxes: If you're moving mid-year, you may owe a prorated share. Verify with the city
• Repairs or staging: If the home needs work to sell, budget accordingly. Minor cosmetic updates usually make sense; major renovations rarely do
• Land Transfer Tax: Alberta has no land transfer tax, but some provinces do. Confirm with your lawyer
• HST on real estate services: In some provinces. Not in Alberta

Example: A $600,000 sale with 4% commission ($24,000), legal fees ($1,200), and staging costs ($2,000) nets you $572,800. That's the money you're working with. This is what goes into the next chapter.

Principal Residence Exemption (Capital Gains)

In Canada, if you're selling your principal residence (the home you live in), you typically pay zero tax on the profit. This is called the principal residence exemption.

However, there are important exceptions:

• If you ever rented out part of the home (basement suite, for example), the gain may be partially taxable
• If you own multiple properties, only one can be your principal residence in a given year
• If the home was ever used for business (home office, rental property, etc.), portions may be taxable

If you're in a straightforward situation (lived in the home, never rented it, own no other property), the exemption almost certainly applies. But if there's any complexity, consult an accountant. This is not a place to guess wrong.

The Purchase Side — What 55+ Housing Actually Costs

Downsizing doesn't always mean buying something cheaper. It depends what you're buying.

55+ Condo Price Ranges in Calgary:

• Entry-level: $250,000–$350,000. Older buildings, more modest amenities, older clientele
• Mid-range: $350,000–$500,000. Newer buildings, fitness centre, social programs, good location
• Premium: $500,000+. Newest buildings, extensive amenities, best locations, younger demographic (55–65)

Condo Fees (typically $400–$900+/month depending on building and amenities) — this is crucial to understand because it's an ongoing expense, not a one-time cost. What's included?

• Property tax (sometimes included, sometimes not)
• Building insurance
• Common area maintenance
• Utilities (sometimes)
• Amenities (gym, pool, common room, etc.)
• Snow removal, landscaping

Many people are surprised by condo fees. In a freehold home, property tax might be $400/month but you're responsible for all maintenance. In a condo, taxes might be $180/month but fees are $650. The total can be higher or lower — understand what you're trading.

Government Benefits and How a Sale Affects Them

Certain government benefits are income-tested or asset-tested. A large sale in a single year can affect your eligibility.

Key programs that may be affected:

• Alberta Seniors Benefit: Income-tested. If you sell in a given year and realize a large gain, it might increase your income enough to reduce or eliminate the benefit
• Guaranteed Income Supplement (GIS): Federal, income-tested. Same issue
• OAS Clawback: At higher incomes, you repay part of your Old Age Security. A large sale can trigger this

This is complex and depends on your specific situation. A financial planner familiar with seniors' benefits can model how a sale impacts your benefit eligibility. This modelling should happen BEFORE you sell, not after.

Reverse Mortgages (CHIP)

A legitimate option many seniors don't know exists. CHIP (Canadian Home Income Plan) is a reverse mortgage product that lets you access home equity without selling.

How it works:

• You're 55+ and own your home
• You borrow against your home equity (typically 30–50% of home value, depending on age)
• You receive the money as a lump sum or line of credit
• You make NO monthly payments. Interest accrues on the loan
• When you eventually sell the home (or the estate does), the loan is repaid from proceeds

When this makes sense:

• You want to stay in your home but need cash (renovations, health care, living expenses)
• You have significant equity but limited income
• You don't want the disruption of selling and moving

When it doesn't make sense:

• You're planning to move soon anyway (just sell instead)
• You want to preserve the maximum estate for heirs (the loan reduces what they inherit)
• You need very large amounts of cash (the limits are often modest)

As a licensed mortgage broker, Kenton can explain how CHIP works and whether it fits your situation. It's not right for everyone, but for some people it solves a real problem.

Bridge Financing

If you're buying before your current home sells, you might need bridge financing — a short-term loan covering the gap between the purchase and the sale closing.

Example: You find the perfect 55+ condo that closes in 60 days. Your current home is on the market but hasn't sold yet. You can borrow against the expected sale proceeds to buy now and repay the bridge loan from the sale proceeds later.

Bridge loans are short-term (typically 6 months or less) and more expensive than regular mortgages. But they solve a real timing problem. Kenton, as a mortgage broker, can arrange these.

Inheritance Planning and Estate Considerations

If the home will eventually be inherited or if adult children are involved in the decision, the legal structure matters.

Questions to address:

• Is the home jointly owned? Both names must be on the sale
• Is there a will? Does it address what happens to the proceeds?
• Is there a Power of Attorney in place? If you're handling the transaction on behalf of a parent, that authority must be documented
• Are there other heirs who might have claims on the proceeds?

These are legal questions. Consult an estate lawyer. But raising them early with your REALTOR® and lawyer prevents complications at closing.

The Bottom Line

For most people, downsizing is a smart financial move. You release significant equity from a large home, you reduce ongoing costs (property tax, maintenance, utilities, insurance), and you often end up with a better quality of life in a community designed for your stage of life.

The key is understanding the full financial picture before you list. That means:

• Market value of your current home
• Net proceeds after costs
• Cost and ongoing expenses of the next home
• Tax implications (capital gains, principal residence exemption)
• Impact on government benefits
• How the surplus (if any) fits into your overall financial plan

This is not something to figure out after closing. This is a before conversation.