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Downsizing your home in retirement won’t always downsize your costs

A condo complex, which was formerly the 2010 Winter Olympic Village used to house athletes in Vancouver.

Photographer: Lyle Stafford/Bloomberg/Photographer: Lyle Stafford/Bloomberg

Downsizing is such a misleading term for retirees.

You downsize your living space when you sell the family home and move into a condominium, not your cost of living. So budget for roughly the same living costs in a condo as you had in your house, give or take a bit. You'll have smaller quarters, but similar or even higher expenses.

Try the new Does It Pay to Downsize to a condo interactive worksheet on our website. It's designed to help people analyze how their costs as homeowners with a paid-off mortgage would compare with owning or renting a condo.

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Just as an illustration, we plugged in the September national average housing price of $433,649 into the worksheet, as well as a 1,000-square-foot condo priced at $350,000. Monthly costs for the house and condo, respectively, are $1,231 and $1,222. Yes, the condo's cheaper – by a grand total of $9 a month.

The new worksheet is part of The Globe's new online retirement hub, which we're building into a one-stop source of information for people who are planning for or already at the end of their working lives. Downsizing the family residence is one of the hardest decisions to be made by retirees because it means leaving what for many people is a much-loved home.

The payoffs for moving to a condo are many – smaller and more manageable living quarters, freedom from dreary home maintenance chores, amenities such as a concierge, pool or gym and the chance to live in a part of the city that suits your lifestyle. What you lose, and this is huge, is your ability to control spending on maintenance and upkeep of your home.

In a house, you can postpone needed repairs and choose the bargain solution when you decide to go ahead. You can have a neighbour's child cut your grass or shovel your own driveway and wash your own windows. In a condo, you pay for all of these jobs to be done for you through monthly fees.

Moreover, you won't have the discretion to pick the cheapest service provider. Rachelle Berube of Landlord Rescue, a property manager, said condo management companies want reliable contractors and aren't keen to take a chance on smaller, cheaper options. "If I run a building, I'm going to have to get a landscaping company and they're going to have to be a fairly big company – insured and licensed," she said.

Few people who live in a house set aside money every month for future maintenance projects. In a well-run condo, your monthly fees are designed to do just that, while also covering current operating expenses in the building.

Audrey Loeb, a lawyer at Miller Thomson who specializes in condominium law, said condo fees of 70 cents a square foot sound right for a well-appointed condo and $1 isn't out of line for high-end buildings.

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If you pay less than that, you face a rising risk of a special assessment to cover the cost of repairs that overtax the building's reserve fund. We didn't add special assessments to the worksheet, but they're possible in condos that aren't planning ahead to cover future spending on projects including replacing elevators and parking garage floors eaten up by road salt.

Our worksheet sets monthly condo fees at 70 cents a square foot, and it pegs the monthly cost of home maintenance at 1 per cent of the value of your home divided by 12. It also factors in utility costs, which should be lower in a condo. In the worksheet, we used a fairly standard arrangement where electricity and water are included as part of condo fees, while heat and cable TV/Internet are paid separately.

The rental option was included in the worksheet just for curiosity's sake. When you rent, you trade higher monthly living costs for the flexibility of keeping the money you made by selling your house and not using it to buy a property. You also have some protection against the big condo fee increases and special assessments that owners may face.

"You can't know from one moment to the next what's going to hit you in a condo," said Ms. Loeb, the condo lawyer. "But as I always say, you have to take me with a grain of salt. Nobody calls me to say, good morning, Audrey, I'm so happy in my condo."

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