For many Canadian seniors, the family home is their single largest asset — often worth $600,000 to $1.5 million or more in major markets. Deciding whether to sell, downsize, or stay put is one of the most financially significant retirement decisions you can make. This guide breaks down the real financial math of downsizing in 2026.
The principal residence exemption (PRE) means selling your family home is completely tax-free in Canada — no capital gains tax on your primary residence. This makes downsizing an incredibly powerful wealth transfer tool.
Freed-up equity from downsizing can be:
| Cost | Typical Range |
|---|---|
| Real estate agent commissions (seller side) | 3–5% of sale price |
| Land Transfer Tax (buyer side) | 0.5–2.5%+ (varies by province) |
| Legal fees | $1,500–$3,000 |
| Moving costs | $3,000–$15,000 |
| Renovations/staging for sale | $5,000–$30,000 |
| New condo/home furnishings | $100–$50,000 |
| Condo maintenance fees (ongoing) | $400–$1,200/month |
Selling a $1.2M semi-detached in Toronto and buying a $750K condo frees approximately $400K after costs (agent fees ~$60K, LTT ~$15K, legal/moving ~$20K). The monthly savings on property taxes and maintenance are real but condo fees can partially offset this.
Similar math, but BC PTT (Property Transfer Tax) adds costs for the purchase. First-time buyers get exemptions but downsizers do not. Budget for PTT of 1–3%+ on the new property.
The downsizing gap is often smaller — say $200–$400K — but the freed capital is still meaningful. Homes in these markets have also appreciated significantly, making downsizing increasingly attractive.
Condos offer reduced maintenance responsibilities but come with monthly condo fees ($400–$1,500+) and special assessments. Research the condo corporation's financial health before buying. Request the status certificate and reserve fund study.
Easier mobility (single floor), reduced yard work, but still all the maintenance responsibilities of homeownership. Popular choice for active seniors in their 60s.
Age-restricted (55+) communities offer social programs, maintenance-free living, and accessible design. Often freehold townhomes. Popular in BC's Okanagan, Ontario cottage country, and suburban areas.
Selling and renting frees 100% of your home equity for investment. Particularly powerful in high-cost cities where renting can be cheaper than condo fees + property taxes. Provides flexibility to move as health needs change.
The sale itself is tax-free (principal residence exemption). However, investing the freed capital creates taxable income. Interest income from GICs is fully taxable. TFSA is the ideal first destination for proceeds (up to cumulative room). After TFSA, consider a mix of dividend stocks (preferential tax treatment) and GICs.
Placing proceeds in your TFSA does not affect OAS, GIS eligibility, or the OAS clawback — because TFSA withdrawals are tax-free and not counted as income.
The family home carries decades of memories. Many seniors regret downsizing when they do it too soon, particularly if they move away from established social networks. The ideal time is when:
Don't downsize purely for financial reasons if you're not emotionally ready — the stress of an unwanted move can negatively impact health and wellbeing.
KOHO offers free banking with no monthly fees — perfect for fixed-income seniors who want to keep more of their OAS and CPP. Easy to use on mobile or desktop.
Get KOHO Free — Code 45ET55JSYA