Ask Paul: I'm desperate to go caravanning, should I sell my house to pay for it?

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Dear Paul,

I am a 62-year-old single woman and was forced to leave my job in 2017 after serious, chronic bullying. I was a clinical nurse specialist in palliative care. I was not in a very good place or head space in 2017, and lived off my income protection and took money from super, as I still have a mortgage. I tried to work part-time but was not well enough. 

In 2018, I saw a psychiatrist and was diagnosed with depression. In January 2019, my darling brother was diagnosed with terminal cancer and he died in February 2020. So last year I became acutely depressed and the psychiatrist recommended medical retirement. I applied for and was granted the disability support pension in December last year. 

ask paul clitheroe im desperate to go caravanning should i sell my house

I am on the Central Coast of NSW but don't wish to stay here. I have a sister in far north Queensland, and friends in Newcastle and Tasmania.

I have a mortgage of $250,000 on a house valued at $620,000. I have no other debt and only $100,000 in super. I want to downsize and move so that I don't need a mortgage.

Also I am desperate to go caravanning ASAP with my dogs. I always wanted to do this on retirement, and now don't want to wait. I am researching vans at the moment. I want to travel indefinitely and also hope to find my next home as I travel. 

My dilemma is that I initially thought I would sell and invest the money indefinitely while I travel. But returns are so poor - less than half of real estate growth.

Should I keep the house? I can get $500 a week, which would continue the mortgage repayments at more than the minimum amount. I would refinance on a lower rate.

I can't find a better option in view of the poor return on investment accounts.

I would love your advice, please. - Lou

Lou, you have been through some very difficult times and my commiserations on the death of your brother.

I have no skills in the area of mental health, but I do hear you clearly when you say you are desperately keen to go caravanning with your dogs indefinitely, so I think we should focus on this as your primary goal.

You should also have the age pension in your sights for when you turn 67. Here home ownership is very important as it is an exempt asset in regard to getting the maximum pension.

I am really against you selling your house right now for a few reasons. Firstly, a home is your ultimate long-term security.

Secondly, property on the Central Coast is booming, both in value and rent. If you were to sell and immediately buy something smaller in, say, Newcastle or Tasmania, I am fine with that, but I think this would add a lot of stress and delay your caravanning adventure. Thirdly, as you say, investment returns from things like cash at the bank are very low.

Finally, there is the "exempt asset" issue that a home brings to your eventual age pension application.

Until you find your long-term home as you travel, I think your idea of renting your present place and using that for living expenses makes a lot of sense. No one really knows where the property market is going, but with the Central Coast's popularity and population growth it is hard not to have a positive outlook on values in that area.

In your situation, I'd keep your home, rent it and work out where you want to live at leisure.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.