Downsizing to a smaller home means less upkeep, lower bills and more time to do the things you love. It's an exercise in saving both money and time. If you are downsizing in later life, it means you can choose a property that will be better suited to your needs as you get older.
Like most things, downsizing your house to save money comes with trade-offs. Downsizing your house to save money may reduce some expenses, including your mortgage payment and utility bills, Dutton says. One reason to downsize your home is to reduce property taxes.
When to Downsize Your Home: 7 Signs It's Time to Put That Big Old House on the Market
There are several ways you can save money and have a happier life when you downsize.
The Benefits of Downsizing
Homeowners age 65 to 74 who downsize sell a $270,000 home and purchase one for $250,000, on average. Home values have gone up 8.7 percent over the past year and are expected to rise another 6.5 percent within the next 12 months.
On the flip side, debt-hating Dave Ramsey wants your housing payment (including property taxes and insurance) to be no more than 25% of your take-home income.
Disadvantage: Lack of Opportunities
Downsizing means fewer available positions within a company, and some workers will probably have to be terminated. It also means existing employees who are kept employed will have fewer opportunities to grow and rise to higher positions within the business.
Though homes can be valuable assets to own, they shouldn't be purchased primarily for investment. Owning offers stability, tax benefits, and equity, among other perks. Renting provides more flexibility and liquidity, and you'll spend less money (and time) on maintenance.
Buying a home after 55 is a major decision that is sure to impact your retirement. While some financial companies will give out loans to older buyers, most are wary of this for several reasons. According to personal finance expert David Ning, it's unwise to get a new 30-year fixed mortgage in your 50s.
There's no real need to downsize if you're opposed to the idea, but often it can offer a greater quality of life with the money you make from the sale. ... You may struggle to find a smaller property in your area or feel that even the smaller homes are too expensive for you to truly benefit from the sale.
Signs to Downsize: Empty, Unused Space
Do you have multiple guest rooms collecting dust? A three-car garage holding just one car and an old bicycle? Why spend the time and money to keep unused areas clean and heated when they're far more likely to collect junk than bring joy?
Here are some sure fire signs that it may be time for you to downsize:
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