Downsizing can save you both stress and money in the future. Less space means less upkeep, and it also means a smaller financial burden for you going forward into retirement. Downsizing can be a difficult process, though, especially if you’re not prepared for the financial or emotional burden of moving.
(Video Credit: Corinne Rivera / HomeLight)
Take Bill and Dorothy, for example. High year-round temperatures and the need for a property that is easier to maintain inspired them to downsize. The decision wasn’t easy: 44 years in their home and strong friendships in their area made the process of downsizing to the right home important. The house needed to meet all of their criteria.
Enter Stewart Walowitz of the top 1% Don Matheson team, who helped them move into a home in a higher area where temperatures aren’t so extreme. Bill and Dorothy were able to sell their home quickly for a good price, and they still keep in touch with Stewart.
Bill and Dorothy knew that downsizing was the right move for them, which made the process feel seamless and simple. If your motivation for downsizing is clear (or even if it isn’t) to you, we’ll help you answer the question, Should I downsize my home? so that you can have a similar experience.
Should I Downsize My Home? Answer 5 Questions
- How high are your mortgage payments?
- Can you really afford to move?
- Can you part with many of your belongings?
- Do you currently live near family?
- Will someone inherit the house?
1. How high are your mortgage payments?
The amount left on your mortgage should be one of the largest deciding factors for whether or not you should downsize. Think of it this way: as you inch closer towards retirement, you want to cut debt as much as possible since you won’t have an income. If you’re not close to paying off your mortgage and you’re getting close to the average age of retirement, downsizing is a great option.
There is a caveat, though.
A smaller house doesn’t necessarily mean a cheaper house, especially in cities like Portland and San Francisco, where housing costs have skyrocketed. This makes downsizing trickier because not only do you have to look for a smaller home that’s less costly, but you also have to make sure you sell your home for a price that’s higher than the new home.
If you can find a home for a decent price and the sale of your current home outweighs that—a top real estate agent can help you figure that out, by the way—then you have the potential to save a lot of money and even make money.
Take Richard and Mary G., a retired couple from Houston, for example.
They lived in their five bedroom home for decades before they made the decision to downsize their home. The neighborhood where they lived was growing and when they sold their already paid off house, they made a profit. Then they used that money to purchase a smaller home in Colorado up front and even managed to pocket some extra money for savings.
2. Can you really afford to move?
Both moneywise and timewise, moving is expensive. Hiring professional movers costs upwards of $2,000 to move from a bigger home, and that’s just if you’re moving locally.
Moving also takes a lot of time. You need to pack up your belongings in boxes, disassemble and reassemble furniture, transport heavy objects to the new place, and so much more. After that’s done, have to unpack.
Is the time and stress worth it to you in the long run?
3. Can you say goodbye to your belongings?
All of the items, including furniture, electronics, decorations, and appliances at your current house won’t all fit into a smaller one. If you decide to downsize, you’ll have to make the decision of what items you want to keep and which ones should be trashed or donated.
People often have trouble saying goodbye to items that they’ve had in their homes for years. You’re parting with something that you’ve spent money on and that has sentimental value. Is giving away a chunk of your belongings too hard?
Additionally, belongings aren’t always objects; they could be people. For example, the Gillespies moved thousands of miles away when they downsized, leaving behind the friends who they spent countless times with to be in an area where they only knew a few people. This was one of the hardest and most emotional parts of the move.
4. Do you live near family?
With age comes a decline in health and a lower ability to tend to the home like you were able to when you first bought it. Add that to having to take care of your own health, and suddenly a larger home becomes a burden rather than a luxury. Some people, if they have the money, could hire a home health care aide, but they normally cost over $40,000 a year. Medicare sometimes covers the cost of this, but if you’re not eligible, it’s not feasible.
Remember Richard and Mary G.?
Health concerns and an inability to take care of their large home, which included a pool, persuaded Richard and Mary to move into a smaller home near their family. Their family lived in Colorado, and they reached a point when the couple knew that downsizing and living closer to them is the best option for their situation.
When they did downsize, they did so smartly and moved into a home that had the master bedroom on the main level, and a walk in shower. It was also close to amenities and near public transportation in case they lost the ability to drive.
Most older people rely on family to help them with chores and maintenance. If your family is distant, though, how do you plan on keeping up with the house? If you believe this will be a struggle, then downsize, and do it sooner than later. The amount of upkeep on a smaller home is going to be much more manageable in you older age, as long as the smaller house has features fit for aging individuals.
5. Will someone inherit the house?
Do you have children, grandchildren, or other kin? Ask them if they want the home after you pass. If they don’t want to inherit the home for whatever reason, then downsizing is a good option.
If you still have a mortgage on your home, then either the co-borrower will become responsible for the remaining payments or, if you don’t have a co-borrower, the home will go into foreclosure after you pass. By downsizing, you could pay off your mortgage with the sale and then have smaller payments or none at all when you move to a smaller, less expensive home. This removes the hassle of planning for what happens to the mortgage after death.
If your home is paid off, selling it and downsizing can also save you and your family a headache down the road. Estate planning is a difficult process, especially when it comes to passing down a home. Planning for a smaller, less expensive home is less costly and time-consuming than a larger one.
None of these situations are independent of one another, and they all work in combination to help you determine if downsizing actually is feasible. Sitting down and mapping out the pros and cons is important, and only that will help you determine if you should downsize or not. Maybe the cost of moving is high but the burden of having to care for a large house on your own is just too much to handle.
You need to assess your own situation carefully and thoughtfully. If you do decide to make the move, don’t do so without a successful real estate agent at your side.