Should You Downsize your Home?
Downsizing your home is a big decision and it’s often an emotional one. However, for many people, it can be the right decision to make. Moving from a big, expensive home into a smaller, less expensive one, can help you financially. Plus, a smaller home will likely require less maintenance, which can simplify your life.
However, this is a big decision to make, and there are many factors involved. Downsizing is obviously a very personal decision and each situation is different. However, here are some situations where it might make sense to downsize your home.
If Your Home’s Costing You A Lot of Money
Houses cost money. That much is obvious. However, if your mortgage, insurance, and property taxes are excessive, you may want to consider downsizing. This is especially true if you’re retired or near retirement and still have a big mortgage to pay. While you may have been able to afford your housing costs when you were working full time, things change when you retire. An income drop in retirement could make it difficult to afford your housing costs.
In addition to your mortgage, you house could be costing a lot in maintenance and repairs. This is especially true if you live in an older home. Take the time to sit down and review what your home is costing in maintenance and repairs. It might be more than you expect.
Your home may no longer suit your current situation either. For instance, if you’re retired and have difficulty climbing stairs, and your home has several steep staircases, you might have to do extensive renovations to stay in your home. Not only could this be difficult, but it will also be costly.
If You Don’t Have Savings
Having savings is important to avoid financial trouble. This is true for both emergency savings and retirement savings. If you’re not able to save money for emergencies and for when you’ll no longer be working, you might wish to downsize your home.
Not only could you potentially profit from the sale of your home (which could result in money you can use to increase your savings) but moving into a smaller home could reduce your monthly costs, which could make it easier for you to save for emergencies or retirement.
If the Space isn’t Needed
Do you need all of the space you have? For instance, if you own a large home that you raised several children in, but those children have since moved out, you may no longer require a house of that size. There are financial reasons to downsize if this is your situation, but this could be a lifestyle choice as well. You might not want to have to keep a larger home clean and organized. As mentioned, your property may not suit your situation in other ways as well, such as if you have mobility issues that you did not have in the past.
It can be emotionally difficult to sell a home you’ve lived in for many years, especially if you’ve raised a family there or if you have many wonderful memories in the home. However, if selling your home improves your situation going forward (in terms of helping your lifestyle and/or your financial situation) then it may be worth your while to consider making a move.
Other Factors to Consider
Moving from a larger home to a smaller one isn’t just a financial transaction. It isn’t just an emotional one either. There are certain logistical concerns that you’ll want to think about before you downsize your property.
If you’ve lived in your home for a long time, you’ve likely accumulated a lot of stuff. How will you reduce what you own when you move? If you have a lot of sentimental items and family heirlooms, do you have room for the ones that truly matter? Does anyone else in your family want them? If you don’t have a plan, you could be in a difficult situation if you move.
You may also need to factor in the cost of replacing your furniture if you need to get rid of larger items and replace them with smaller ones. If you have furniture that is too large for the rooms in your new home, you’ll need to have a plan to buy new furniture.
Of course, you’ll also need to consider whether the sale of your current home will cover the cost of your new home. Downsizing doesn’t always result in a financial benefit. Depending on where you live, and where you want to live, there are various costs involved including closing costs, realtor fees, land transfer taxes, and other expenses. Make sure you take these into consideration when you’re thinking of downsizing.