As a homeowner, downsizing to a smaller home is oftentimes an inevitable decision. But it’s not one made without an emotional pull. You may be leaving your forever home, the home where you raised your children. But there comes a time, particularly as you approach retirement, when less living space sounds more appealing. So when should you downsize your home? When is the best time to consider this potential change of size, space, and scenery? Well, if you’re experiencing any of the following, this transition should be on your radar.
1. You can capitalize on the market (and your existing home).
Timing can certainly be a factor when it comes to cashing in on your home. If your home has increased in value during a robust housing market with low interest rates (hint: right now), you may experience a bigger payday than you anticipated.
Let’s take it a step further to something within your control: the equity in your home. If you have a significant amount of equity or you own your home outright, you can use it to help fund your next home. And chances are, a smaller home will mean a lighter financial load for you.
2. More than one room in your house is collecting dust.
Having a guest room is great when family and friends visit (more on them in a bit), but when you have three spare bedrooms that haven’t been occupied in months, it may be time to consider a downsize to a smaller house. This goes for common rooms, too. Do you have a finished basement or a den that you’re barely using? These rooms, just like bedrooms, cost money in the form of property taxes, maintenance and utility bills. This is valuable time and money you can save—or spend on other things you enjoy.
3. Retirement is here, or near!
Downsizing your home for retirement is one of the most common reasons longtime homeowners choose to go smaller. Obviously, you want to stretch out your retirement savings for as long as possible. So in this case, downsizing your home into retirement and scaling back your mortgage payment is a financially savvy plan. The benefits of buying a home later in life couldn’t be clearer, but be cognizant of when it makes sense for you to buy. For example, it’s easier to get approved for a mortgage while you’re still fully employed. Why? Your debt-to-income ratio (DTI) will be much higher and potentially unfavorable to a lender if you’re without a steady paycheck.
4. You’re missing quality time with family.
At this point, you’re most likely an empty nester whose children have moved out, maybe even with families of their own. As much as it can be difficult parting ways with the family homestead, it might make the most financial sense. Plus, if you’re hundreds or thousands of miles from your children and grandchildren, you’re certainly missing out on special family memories. Moving closer to your loved ones will ensure you’ll be there to enjoy birthday parties, holidays, and graduations. And your kids probably wouldn’t mind if you babysat every now and then, too!
5. Maintaining the home is getting overwhelming.
A large home means more cleaning, more maintenance, and more money, which inevitably leads to more stress for you. In fact, 51% of retirees cited lower monthly costs as their reason for downsizing their house, according to a 2014 Merrill Lynch report. It can be physically draining trying to maintain both the interior and exterior of your property—a hassle you need even less as you age. Sometimes the most basic things become irritating, like continually not being able to find things in your house!
Downsizing liberates you from all this. It forces you to prioritize not just your possessions, but your lifestyle, too. And spending less to live in and maintain your home frees up your time and money, so you can use both for things and experiences you genuinely value and enjoy.
Deciding when you should downsize comes down to being honest about your current needs and visualizing your next phase. Embrace these signs, because at the end of the day, it’s about downsizing your house to upgrade your life.
Once the downsizing decision has been made, one of the biggest hurdles is determining how much space you’ll need in your next home. Stay with us, as this blog helps you plan for the right living space when downsizing.