Selling the family home

Downsizing your home

By the time you are considering retirement, it is likely that you will have substantial equity in your home. You may even own your house outright. Selling the family home is one way to free up cash for retirement. The money you receive can be invested in shares, term deposits, managed funds or superannuation.

In addition to finding a place to live, there are many financial, practical and emotional factors to consider before putting up the 'For Sale' sign.

The impact on social security

Your age pension depends on what your assets are worth (the assets test). Selling your home may have an impact on the amount of social security benefits you receive.

Your home and the 2 hectares surrounding it are not counted in the assets test. If you sell your home, the proceeds will be exempt for up to 12 months, as long as you are planning to use the money to buy another home. However, the proceeds will be deemed under the income test.

If you sell your home and buy a cheaper one, the surplus cash will be counted in the assets test. It's best to speak to a Department of Human Services Financial Information Service (FIS) officer for more information.

Case study: Lee Lin sells the family home

Senior woman putting the family home on the marketLee Lin is 67 and divorced. She decided to sell the family home after her children moved out because it was too big. She expected to sell her old home for $600,000, buy a cheaper apartment for $400,000 and have $200,000 left to invest.

Before she put her house on the market, she went to Centrelink and asked how the sale would affect her age pension. The FIS officer told her that the $200,000 would be counted towards the assets test for her age pension. Lee decided she was still better off downsizing, even though it would reduce her pension slightly.

Alternatives to selling

Selling the home where your children were raised and leaving behind neighbours and friends can be difficult and stressful. Add to that the challenges of relocating to a new area, moving into a smaller space and making new friends. Suddenly, staying put might seem like a good idea.

Here are some alternatives to selling your home:

  • Think about converting your home to dual occupancy so you can live in one half and rent or sell the other half
  • Rent out some rooms (this has tax implications and may affect your age pension so seek financial advice before you proceed)
  • Consider a reverse mortgage if you need extra cash and have solid equity in your home

If you intend to stay in your house for the long term, you should consider renovating your home to ensure it is safe and easier to move around as you get older. My aged care website has information on getting help to stay in your own home so you can maintain your independence for longer. 

What to do next

After you've sold your house, you may have money to invest in other income-producing assets. There are lots of options available so seek financial advice on the best mix of investment products for your needs.

Selling the family home is not an easy or simple decision. Before you do anything, consult a financial adviser on the tax and social security implications, and speak to family and friends.

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Last updated: 20 Jun 2017