Read This Before You Decide to Downsize

The true cost of downsizing may be a lot higher than expected. Wahi speaks to a seasoned personal-finance pro to learn how downsizers can prepare.

By Josh Sherman | 4 minute read

Downsizing is a popular way for Canadians to fund their retirements, but many are disappointed by the actual amount of money that’s leftover after all the costs associated with a move are added up, suggests a personal-finance expert.

“Unless you are moving from an expensive location to a cheap one, you might not net very much from downsizing,” says Anita Bruinsma, founder of Clarity Personal Finance. 

Part of the trouble is the narrowing gap between detached home prices and condo prices, as well as rising property values in markets that are popular for big-city downsizers, such as Atlantic Canada or small towns and cities outside of the Greater Toronto Area. Another issue to contend with, says Bruinsma, are the many costs associated with downsizing. 

Some 41% of respondents to a 2022 survey from HomeEquity Bank say they weren’t aware of the true costs related to downsizing.

The Hidden Cost of Downsizing 

Hidden or often-overlooked downsizing costs include renovations your new property may require, particularly if you’re moving into another ground-oriented home, such as a townhouse or semi.

“One item people forget about when moving is the work they will want to do on the new home,” says Bruinsma. “Painting, yes, but also things like upgrading a bathroom, replacing kitchen cabinets, installing new floors, building a new deck — things that the prior owner didn’t get around to doing or didn’t want to do,” says Bruinsma.

There are also sometimes surprise costs. Perhaps the roof springs a leak, or the furnace needs replacing sooner than expected. “There has to be a contingency fund for this,” she says.

For homebuyers in Toronto, there are two separate land-transfer taxes (municipal and provincial) to fork over, though in most markets only the provincial levy applies.

“You also have to get your current home ready to sell,” says Bruinsma. “If you have only ever bought a place and never sold one, you might be surprised when your real estate agent recommends doing some touch-ups or repairs before you list it. This can also add up.”

In all, there are potentially dozens of costs associated with downsizing. Here are some of the main ones, according to Bruinsma:

• Land transfer tax(s)

• Legal fees
• Realtor fees (often 5%)
• Mortgage pre-payment penalties
• Hiring movers/using storage, if necessary
• Short-term rental if your closing dates don’t line up
• Carrying two homes temporarily if the closing dates don’t line up (utilities in two homes, possibly carrying a mortgage on old home until it closes, insurance on two homes)
• Touching up current home before listing it
• Hiring junk removers when emptying out current home
• Repairs and upgrades to new home 
• Surprise costs related to new home
• Condo fees
• Utility hook-up fees (internet, phone, hydro, home security)

To demonstrate how these costs can snowball, Bruinsma crunched the numbers. 

For the exercise, she assumed a Greater Toronto Area household was downsizing from a median-priced detached home ($1,160,000) to a median-priced condo unit ($585,250). Before any costs are subtracted, that leaves the downsizer with $574,750. Note that in some cases, downsizing will net less as the downsizer may prefer a larger, more-expensive condo. 

After taxes, fees, and other costs, the downsizer is left with $473,920.

According to BMO’s Annual Retirement Survey for 2026, Canadians say they need $1.7 million for a comfortable retirement, compared to $1.54 million in the previous survey. 

Deciding if Downsizing Is the Right Fit 

To decide if downsizing is right for you, Bruinsma suggests asking yourself if you’ll miss having access to a private backyard, garden, or garage.

She also notes that more adults are living at home with their parents longer. “Do you want to be able to help them if they need it?”

Another thing to pay attention to are the monthly ongoing costs. A smaller home doesn’t necessarily mean recurring expenses will be significantly cheaper. This is especially true for larger condo units, where monthly maintenance fees can be in excess of $1,000 per month. 

There’s stress to contend with, too. “Selling and buying at the same time can be really stressful as you try and get the timing right,” Bruinsma explains.

How to Prepare for Downsizing

If you’re moving ahead with downsizing plans, Bruinsma recommends running the numbers before making any serious commitments. “If you can’t do it, hire an advice-only financial planner who can help you. Don’t be surprised by the costs,” she says.

Once you have the numbers, you’ll have a better sense of whether or not the move is worth it. Ask yourself if you really need to downsize to free up funds, says Bruinsma: “If you don’t, and you can still manage your current home, maybe it’s best to stay where you are.”

She also advises against doing anything on the cheap. “There are no cost-cutting measures here,” she says. “Always hire an agent — don’t cut corners there. Make the house look good — don’t cut corners there. Most costs are non-negotiable.”