Keeping the family home long after the kids have moved out may be a goal for many people – especially at the holidays or family gatherings – but it can also become a financial and personal burden. It’s not always easy to make the decision to downsize into something smaller, especially when there are so many memories and a sense of comfort in your current home. There are several reasons why people do eventually downsize. It may be because of failing health or mobility (present or anticipated), financial reasons, a lifestyle or social choice, or simply because a large home is a lot of work. Whatever the motivations, there are a few things to think about before you finalize your decision to downsize into something smaller. I’ve outlined the key ones here:
Does your current home meet your present & future needs?
Is your home becoming too much of a burden to clean, repair and maintain? Are you worried about the upkeep, snow removal, yard work and so on as you get older? Is it – or will be it be – accessible for you? These are all important considerations. You don’t want to be in the situation where you have to sell your home quickly (and for a lower price) if something unexpected happens, so advanced preparation and planning is always a good idea.
Is the timing right?
Even if your current home is working well for you now and you’re in great health, there are some people who downsize earlier than expected if they have a mortgage that’s up for renewal, or to take advantage of the hot housing market and low interest rates we’ve been experiencing. Not sure what you’d get for your home? You can have it appraised by your lender or Realtor to give you a general idea, but you’ll also need to find current list prices for your downsized home to make sure it’s a strong financial decision.
Other timing considerations can also be impacted by what’s going on with your career, your commute, retirement opportunities, proximity to kids and grandkids, and so on.
Have you calculated your home equity & profits?
If you’ve owned your home for several years and have been paying down your mortgage faithfully, you’ve likely built up a fair amount of equity. Its value may even be double or triple what you paid for it, and with little left owing on your mortgage, well…let’s just say you might be sitting on a gold mine! If you downsize into something smaller and more affordable, you can invest those profits, pay off debt, finance your retirement, travel, or simply breathe easier while enjoying your increased wealth.
One downside to downsizing is that, as with any home sale and purchase, you’ll still need to factor in your closing costs which include property taxes, legal fees, inspections, realtor commissions, moving costs and so on. Also, depending on the timing, you may have to pay a prepayment penalty if you sell your current home before your mortgage term ends. Additionally, if you plan on buying a condo, then you’ll have monthly condo and maintenance fees to consider, which could end up costing more than the monthly bills at your current home. Be sure to get solid financial advice and weigh the pros and cons carefully.
What to do with all that stuff?
One of the most challenging things about downsizing is parting with all those treasures and furnishings you’ve accumulated over the years; there’s just not going to be room for all of it! You’ll need to take the time to sort, sell, donate and basically purge each room of your home. If that seems a little too overwhelming, you might not be ready just yet.
Do you want a fresh start and a change of scenery?
Some people are eager for a big change of scenery, while others prefer to remain in the comfort of their community; it all depends on you. Whether you’re thinking of downsizing into a townhome, retirement villa, an apartment, condo, or just a smaller space across town or across the country, it’s important that it meets your personal, social and financial needs.
As you can see, the decision to downsize isn’t a simple one for most people. Be sure to do your research, understand the current real estate market, know your mortgage options and determine the best time to make your move – both personally and financially. As an accredited mortgage broker and financial planner, it’s my job to help you navigate the pros and cons of downsizing. Connect with me today and let’s get started – just call 705-315-0516 to book your appointment.