: A common move may carry hidden costs that reduce equity more than expected
Selling a family home later in life can come with unexpected financial complications, according to a licensed mortgage broker, who says many Canadians underestimate the costs and hurdles involved.
Leah Zlatkin, licensed mortgage broker and LowestRates.ca expert, says rising listings and slower sales activity in the housing market are extending selling timelines and reducing expected proceeds.
“Downsizing can absolutely make sense for many retirees, but it’s not always as simple as selling one home and buying a smaller one,” Zlatkin noted. “Mortgage penalties, qualification requirements, and selling costs can all affect how much homeowners actually walk away with.”
Qualification and penalties
Even when purchasing a less expensive home, lenders still apply standard income qualification rules. Retirees relying on pensions, investment income, or withdrawals from savings may find their income assessed differently than employment income, which can affect borrowing capacity.
Homeowners who sell before the end of their mortgage term may also face prepayment penalties for breaking the contract. Depending on the lender and the interest rate environment, those penalties can amount to thousands of dollars, reducing the equity available for a subsequent purchase.
Zlatkin notes that some homeowners can port their existing mortgage to a new property rather than break it, preserving their current interest rate and avoiding prepayment penalties, though timing and lender requirements can affect whether that option is available.
Bridge financing and transaction costs
When a homeowner secures a new property before the existing one sells, bridge financing may be required to cover the gap between transactions. In a slower housing market, this can expose buyers to higher-than-expected interest costs if the sale takes longer to complete.
Transaction costs also cut into proceeds. Realtor commissions, legal fees, land transfer taxes, moving expenses, and potential home repairs can add up quickly and collectively reduce the cash a homeowner takes away from a sale.
“One of the biggest misconceptions is that downsizing automatically simplifies things financially,” Zlatkin said. “The timing between selling and buying, along with financing requirements, can make the move more complicated than many homeowners anticipate.”
Impact of a soft market
The financial stakes of that timing have grown in a softer market. A November 2025 REMAX Canada report indicated that home sales declined year-over-year in a majority of the 33 markets it tracked between January and October 2025, while listings increased in most regions.
TD Economics, in a March 2026 outlook, said weaker-than-expected housing activity in late 2025 and early 2026 led to downward revisions to its forecasts for home resales and price growth, citing a subdued economic backdrop, elevated uncertainty, and ongoing cost-of-living pressures as contributing factors.
