{"id":596259,"date":"2026-04-20T21:25:33","date_gmt":"2026-04-20T21:25:33","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/596259\/"},"modified":"2026-04-20T21:25:33","modified_gmt":"2026-04-20T21:25:33","slug":"why-downsizing-your-home-in-retirement-often-costs-more-than-canadians-expect","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/596259\/","title":{"rendered":"Why downsizing your home in retirement often costs more than Canadians expect"},"content":{"rendered":"

\"Retired Retired couple moving <\/p>\n

Downsizing is often pitched as a financial no-brainer. Sell the big house, unlock the equity, move into something smaller, and watch your retirement savings grow.<\/p>\n

On paper, it sounds like a clean trade \u2014 but for a growing number of Canadians approaching their golden years, the numbers don\u2019t add up the way they expect.<\/p>\n

In fact, the decision is almost evenly split. A 2025 Royal LePage survey conducted by Leger found that 46% of Canadians approaching retirement plan to downsize within two years of leaving work, while 47% say they will not (1). A closer look at the financial mechanics of selling and moving explains why so many people hesitate.<\/p>\n

On the surface, downsizing looks like simple math: Take the market value of your four-bedroom home, subtract the price of a two-bedroom condo and pocket the difference.<\/p>\n

But this calculation leaves out a long list of costs that can eat into that windfall faster than you might expect.<\/p>\n

In Canada, sellers typically pay 4% to 7% of the final sale price in closing costs \u2014 and real estate commissions are the single biggest line item (2). Across the country, commission rates range from 3% to 7% of the selling price, depending on the province and the specific agreement with your agent (3). On a $900,000 home, that alone could run between $27,000 and $63,000, before factoring in legal fees, adjustments and home preparation costs.<\/p>\n

Then there\u2019s the cost of actually moving. If you\u2019re relocating to a different province \u2014 say, from Ontario to British Columbia to be closer to family \u2014 you could be looking at $7,500 to $14,000 or more just for a professional moving company to transport the contents of a 3- to 4-bedroom home (4).<\/p>\n

And don\u2019t overlook the mortgage picture. Many Canadians who purchased or refinanced during the pandemic locked in 5-year fixed rates at or below 2%. If you sell today and enter the market as a buyer, you\u2019ll be looking at a new 5-year fixed rate of approximately 4.09%, or a variable rate of about 3.35% to 3.70%, as of late March 2026 (5). Even on a smaller mortgage, your monthly payment could be significantly higher than what you\u2019re used to paying \u2014 precisely the opposite of what most people expect when they downsize.<\/p>\n

Here\u2019s where Canadian homeowners catch a significant break compared to their American counterparts: Canada\u2019s principal residence exemption (PRE).<\/p>\n

Under Canada\u2019s Income Tax Act, if a property has served as your principal residence for every year you have owned it, the entire capital gain from the sale is exempt from tax \u2014 with no dollar cap (6). There\u2019s no income threshold, no filing limit and no requirement to reinvest the proceeds within a set time. As long as the property was ordinarily inhabited by you, your spouse or common-law partner, or your children during the ownership period, you can sell a home that has doubled or tripled in value without owing a dollar in capital gains tax.<\/p>\n

For context, when you sell a property that isn\u2019t your primary residence, the CRA doesn\u2019t tax the full profit. Only half of that capital gain \u2014 50% \u2014 is included as taxable income for the year. That rate held firm after the federal government scrapped its proposed two-thirds increase earlier in 2025 (7). But for your primary home, the PRE means the inclusion rate is effectively zero, so you aren\u2019t taxed on the profit.<\/p>\n

There\u2019s one important caveat: If you own more than one property \u2014 a cottage, a rental unit, a secondary home \u2014 only one can be designated as a principal residence in any given year. This is why strategic tax planning matters before you sell. Consult a tax professional or financial adviser to make sure you\u2019re designating the right property as your primary.<\/p>\n

Read more: Here are 5 essential moves to make once you\u2019ve saved $10,000<\/a><\/p>\n

Even with the PRE reducing the tax burden of selling your home, downsizing isn\u2019t always straightforward.<\/p>\n

Financially speaking, moving makes sense when the savings are significant enough to offset the cost of selling. If you\u2019re in an expensive market like Toronto or Vancouver and relocating to a neighbourhood with lower property taxes, condo fees and monthly expenses, recovery can happen faster than you\u2019d expect.<\/p>\n

Also, when your capital gain is fully sheltered by the PRE and you\u2019re moving into a significantly cheaper market, the tax math also works in your favour \u2014 you can invest a significant lump sum to generate additional retirement income.<\/p>\n

And outside of financial gain, proximity to family is still the most compelling reason to move. If your health is declining such that it may limit your independence, it could be in your best interest to relocate where you have support.<\/p>\n

However, many retirees are choosing to stay put \u2014 and for good reason. Canada\u2019s home equity has become increasingly central to retirement security, sometimes uncomfortably so. According to the 2025 Canadian Retirement Survey commissioned by the Healthcare of Ontario Pension Plan (HOOPP), 50% of working homeowners plan to use the sale of their home to fund retirement (8). Having most of your wealth tied up in a single, illiquid asset is a financial risk that many financial planners routinely caution homeowners about.<\/p>\n

If you are a Canadian homeowner approaching retirement and weighing a potential sale, here are practical steps to help you navigate the decision clearly:<\/p>\n

Run the full cost of selling \u2014 not just the equity number. Add up agent commissions (3% to 7%), legal fees, land transfer tax on your new purchase, moving costs and any repairs or staging you need to do before listing. These costs can easily total 8% to 10% or more of your home\u2019s sale price.<\/p>\n

Confirm your principal residence exemption. If your home has been your principal residence for all years of ownership, you won\u2019t pay capital gains tax on the proceeds. But if you also own a cottage or rental property, speak with a tax professional about which property to designate before you sell.<\/p>\n

Check your mortgage penalty. If you\u2019re still carrying a mortgage and want to sell before the end of your term, you may owe a prepayment penalty. For a fixed-rate mortgage, this is typically the greater of three months\u2019 interest or the interest rate differential (IRD) \u2014 which can run into thousands of dollars, depending on your lender and remaining term.<\/p>\n

Don\u2019t let your home become your entire retirement plan. The HOOPP 2025 Canadian Retirement Survey found that 50% of homeowners plan to retire based on their home\u2019s sale \u2014 but financial planners will caution you against relying on a single, illiquid asset to fund your retirement (8). Even if you plan to sell, continue to contribute to your RRSP or TFSA where possible to diversify your retirement income.<\/p>\n

Consider lifestyle cost, not only the financial math. Proximity to family, amenities, single-level living and paid maintenance are the top priorities cited by Canadian near-retirees who are planning to downsize, the 2025 Royal LePage survey reveals. These factors have real financial value over time \u2014 factor them in.<\/p>\n

Downsizing isn\u2019t a swift slam dunk. For some Canadians, it\u2019s the right financial and lifestyle decision. For others, the hidden costs, mortgage dynamics and emotional toll make it a far less obvious move. A closer look at your personal situation \u2014 ideally with a fee-only financial adviser or a certified financial planner (CFP) \u2014 can help you decide.<\/p>\n

\u2014 with files from Melanie Huddart<\/p>\n

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n

Royal LePage (1<\/a>); WOWA.ca (2<\/a>, 4<\/a>); Canadian Mortgage Trends (3<\/a>); Discount Moving (4<\/a>); Ratehub.ca (5<\/a>); Canada Revenue Agency (6<\/a>); Government of Canada (7<\/a>); Healthcare of Ontario Pension Plan (HOOPP) (8<\/a>)<\/p>\n

This article originally appeared on Money.ca<\/a> under the title: Why downsizing your home in retirement often costs more than Canadians expect<\/a><\/p>\n

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Retired couple moving Downsizing is often pitched as a financial no-brainer. Sell the big house, unlock the equity,…\n","protected":false},"author":2,"featured_media":596260,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,103,189968,9567,155,14433,147,530,1666,1048,259882],"class_list":["post-596259","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-canada","tag-canadian-homeowners","tag-canadians","tag-dave-ramsey","tag-downsizing","tag-personal-finance","tag-personalfinance","tag-retirement","tag-retirement-savings","tag-royal-lepage"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/596259","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=596259"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/596259\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/596260"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=596259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=596259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=596259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}