Downsizing and costs

It’s all too easy to forget the many costs involved with downsizing. While you’ll likely come out ahead by selling your home and moving into a smaller residence, the profits may not be as high as you’d hoped.

Land transfer tax

All real estate transactions in Canada involve a land transfer tax, which ranges from small to sizeable depending on the province. British Columbia and Nova Scotia levy the highest amounts, while Saskatchewan and Alberta only charge a nominal transfer fee. The precise figure will depend on the value of the home, but keep in mind that it can easily amount to thousands of dollars.

Realtor’s commission

This common oversight is usually one of the most costly. Rates vary between three and seven per cent of a home’s selling costs, depending once again on the province. Provincial tax also needs to be added to this already substantial amount.

Mortgage penalty

Many mortgages can only be broken after a penalty is paid. Precise figures will depend on the lender and specific terms, but the amount requested usually equates to the greatest of either three months’ interest or the interest rate differential.

Legal fees

Any and all real estate transactions require the services of a lawyer. Expect fees between $500 and $2,000 before tax. And more There may also be costs for movers, storage, repairs, reconnection fees and various items needed for your new place. Don’t be surprised if after all’s accounted for, you only come out marginally ahead of where you were when you started. With downsizing in mind, many Canadians are rethinking what “home” looks like. Proof of this trend are the micro homes, small houses or tiny houses.

It's all part of a movement that's taking the traditional concept of manufactured homes beyond the cookie cutter or A-frame style you might expect. When checking out a micro house for your family, there are some things that need to be considered.

“Builders of manufactured homes have always had to satisfy strict guidelines, including those of the Canadian Standards Association,” says Michael Hewett, insurance expert at Aviva Insurance, “Tiny houses impose a unique set of requirements that also affect whether they qualify for insurance coverage.”

Hewett recommends following these general criteria to ensure your home is CSA compliant:

Park it: The home must be permanently parked, skirted and on a permanent foundation conforming with the local and provincial building codes. This is unlike a park model trailer, which can be towed off the lot. Certify it: A tiny house must be built to the CSA Z240 certification or the related standard that applies locally to satisfy bylaws. Manufactured homes of all sizes are subject to these.

Build it: The home must be factory-built, not constructed at home or from a kit.

Stabilize it: Ensure the home is deformation-resistant, having passed the related CSA standard that validates its stability over time.

If looking for insurance coverage, check on the requirements that apply in your region and be sure to find an insurance broker that understands them.