As homeowners approach retirement, their housing needs often begin to change. The home that once provided plenty of room for children, family gatherings, and a busy household may eventually become more space than they need.
For some homeowners, downsizing can be an opportunity to simplify their lifestyle, reduce monthly expenses, and free up money for retirement. But deciding whether to downsize involves more than comparing the size and price of two homes.
Is Downsizing Right for You?
It is common for older homeowners to find themselves living in homes that are much larger than they currently need. Once children move out, bedrooms may sit empty and larger yards or living spaces can require more time, money, and energy to maintain.
While staying in a longtime home may feel comfortable, the expenses associated with that home can affect your retirement budget.
Downsizing to a smaller home may help reduce some of those costs while providing a home that better fits your current lifestyle.
The Financial Benefits of Downsizing
Consider the difference between owning a 2,200-square-foot home valued at $375,000 and moving into a 1,400-square-foot home valued at $275,000. While every homeowner’s situation is different, downsizing may reduce expenses in several important areas.
Property Taxes
Property taxes can represent a significant annual expense, particularly for homeowners living on a fixed retirement income.
Moving to a less expensive home may reduce your property tax burden and help lower your overall housing expenses. Actual property taxes will depend on the property, assessed value, location, and applicable local tax rates.
Utilities
A larger home generally requires more energy to heat, cool, and maintain. Moving into a smaller home may help reduce electricity, heating, water, and other utility expenses.
Those monthly savings may seem relatively small individually, but they can add up significantly over the course of retirement.
Home Maintenance
Homeowners should also consider the ongoing cost of maintaining their property.
Roof repairs, exterior maintenance, landscaping, plumbing, HVAC systems, and other expenses can become costly over time. A larger property may also require more physical work or professional help to maintain.
Downsizing can reduce both the financial and time commitments associated with maintaining a home.
Homeowners Insurance
Homeowners insurance costs depend on many factors, including the home’s value, age, location, construction, and the owner’s individual profile.
Moving to a smaller or less expensive property may help reduce insurance costs, although homeowners should always compare actual insurance quotes before making a decision.
Your Mortgage Payment
For homeowners who still have a mortgage, downsizing may provide an opportunity to significantly reduce the monthly payment or, depending on available equity and the cost of the new home, potentially eliminate a mortgage payment altogether.
Reducing your monthly housing expenses can provide additional flexibility in retirement and allow more of your income to go toward savings, travel, healthcare, hobbies, or other priorities.
Downsizing Isn’t Only About Money
The benefits of downsizing aren’t purely financial.
One of our senior clients who recently downsized discovered that his larger home had become as much a burden on his time as it was on his finances.
A smaller home may mean fewer rooms to clean, less yardwork, fewer maintenance projects, and more time to spend doing the things you enjoy.
The right home for retirement isn’t necessarily the biggest or most valuable home you can afford. It is the home that supports the lifestyle you want to have.
Consider Your Financing Options
Every homeowner’s financial situation is different, especially when approaching or entering retirement.
Before deciding whether downsizing is right for you, consider speaking with an experienced mortgage advisor who understands the needs of older homeowners. Depending on your circumstances, there may be several financing options available, including traditional mortgage products and reverse mortgage solutions.
It can also be helpful to work with a real estate professional who has experience helping older homeowners sell, purchase, and transition into homes that better fit their changing needs.
At Strategic Mortgage Solutions, we’re happy to help you explore your financing options and connect you with a qualified real estate professional when needed.
Is It Time to Consider Downsizing?
Downsizing is a personal decision. For some homeowners, staying in their current home makes the most sense. For others, moving to a smaller property can reduce expenses, simplify everyday life, and provide greater financial flexibility during retirement.
If you’re considering downsizing and aren’t sure where to begin, we’re here to help.
Contact us today to discuss your options and determine whether downsizing could be the right move for your retirement.
