Selling a home? Talk to an advisor to make sure your next move fits into your wealth plan

Selling a home is a major life decision and should be part of a broader discussion with a financial advisor to talk about your overall financial picture. Whatever your reason for selling, we can discuss various scenarios and strategies to help you decide how best to invest any profit from the sale of your home.

So, you’ve sold – what do you do with the proceeds?

If you’re not planning to use the proceeds to purchase a new home, you may have the opportunity to use the tax-free gains from the sale of your home in other ways. There’s no one right way to use the proceeds; it all depends on your financial goals.

Here are some popular options to consider:

  • Invest the proceeds: If you’re nearing retirement, by this stage your mortgage may be small or entirely paid off, and you may benefit from additional savings on insurance, property and utilities bills.
    • If you have available contribution room, consider topping up your RRSP, or moving the funds into a TFSA for tax-sheltered growth. 
    • You could also purchase an income property, which may allow you to make immediate income from tenants in the short term and grow equity in the property over time.
  • Pay down debt: Depending on your financial situation, this may be a good opportunity to use part, or all of the proceeds to pay down existing debt. We can review your overall wealth plan and goals and help you decide how to maximize these funds.
  • Consider safety in comparison to future growth: Parking your profits in cash may be the easiest choice if you don’t know your next move and want to be able to tap into funds at any time without penalties or fees. But remember, your money won’t grow so this should be a short-term decision.
    • With inflation taking such a large toll in our current economy, you’ll want to ensure that your savings are not eroded over time. Consult with your investment advisor for the best options for short term and long-term investments.
  • Purchase permanent life insurance: The next stage of your life may offer some insight into how best to reallocate any surplus cash you have from the sale of your home.
    • If you’re planning to transition into retirement in the next 10-15 years, purchasing a last to die permanent life insurance plan may provide an additional source of income in the future. This could allow a more aggressive drawdown from registered investment.
    • If you don’t need the supplemental income, reallocating the funds into a permanent insurance contract can allow for tax-preferred growth that can be added to your estate. 

Want to learn more?

Ask us about these related articles:

  • Principal residence exemption 
  • When to sell the family home
  • Selling your residence in Canada – for U.S. taxpayers  

Ready to sell?

Consider these questions:

  1. How much equity do I have in my home? The costs of selling your home can outweigh the equity you’ve established if you’ve only owned your home for a short time. Even in a hot market you may not be ahead by much after you factor in the costs of selling. Ultimately however, the decision to sell your home is driven by your personal circumstances and your reasons for moving.
  2. What are the tax implications of selling my home? In Canada, homeowners who sell their principal resident may benefit from substantial tax-free gains thanks to the principal residence exemption. But if the Canada Revenue Agency (CRA) determines that you are regularly flipping homes, you may be denied this exemption. What’s more, you could be taxed on any profits as 100 percent taxable business income. 
  3. Am I emotionally ready? If you’ve lived in your current home for some time, you likely have associated memories – it can be hard to leave that behind. Doing the emotional work beforehand will help make the process easier. That means looking at your home’s flaws (too small, too far away from work etc.) and being at peace with your reasons for moving, before you list.