If your home seems to be bigger than what is necessary for you, you may be wondering if downsizing is the proper step for you to take. While there are many factors to consider in order to determine if you should downsize, here are several benefits of downsizing as well as things that you should consider before taking this step.
What are the Benefits of Downsizing?
Downsizing your home can offer numerous benefits. Some of these include:
- Increasing your retirement fund
- Getting rid of debt
- Making your bills more affordable
- Reducing maintenance needs
Clearly, one benefit to downsizing is that you may be able to reduce or even eliminate your mortgage loan. After all, in theory, selling your bigger house for a smaller one means you are likely to make enough money from the larger home to pay for the smaller one. Whether you pay off your mortgage loan entirely or simply reduce it, this obviously clears up more money for you. This extra money can then be used to make your lifestyle more comfortable or it may be used to pay off other debts or to increase your retirement fund. Simply increasing the amount that you put toward retirement by a few hundred dollars a month can significantly increase your retirement funds when you reach your golden years.
Of course, downsizing also has the benefit of reducing maintenance needs. With less of a house to worry about, you have less cleaning to do, which helps to free up more of your time. A smaller place also means that general maintenance and repairs are likely to be less expensive while the cost of heating and cooling the home will be reduced. This helps to further increase the amount of money that you can put toward retirement, paying off debts or improving your lifestyle.
What are the Downsides to Downsizing?
Depending upon your needs, there are some potential downsides to downsizing. For example, when considering your long-term needs, you may discover that you will have a need for more space in the not-too-distant future. If you anticipate caring for your aging parents, for example, you might need to hold on to your larger home. Furthermore, while downsizing may help you save on your mortgage costs, there may be hidden costs that make downsizing a less desirable option in terms of tightening up your finances. If you need to make costly repairs to your home before you sell or if you are trying to purchase a smaller home in a nicer neighborhood, for example, you may not enjoy the benefit of eliminating the need for a mortgage loan. Similarly, your new home may have higher insurance, property tax and HOA costs.
Of course, you also have to consider how you feel about making a move to a smaller home. If your heart is telling you not to do it and if you really don’t want to leave your current home, then downsizing may not be the right choice for you at this time.