Retirees, empty-nesters with children away at college, and people who want to live a simple, clutter-free life often go the downsizing route. Downsizing a home entails selling one’s existing residence and using spare equity to purchase a smaller house or apartment.
There are pros and cons to doing this, broken down in the following:
Mortgage reduction. People who have downsized homes benefit from smaller mortgage repayments. The money saved could go towards other financial obligations, such as debt reduction and boosting a retirement fund. It can even be used to fund new hobbies or vacations.
Lower costs. Utilities for a smaller home cost much less than those for a large home. People who live in more compact homes don’t have to spend as much on maintenance and repairs, not to mention landscaping and housekeeping fees.
In addition, moving into a smaller home is an easy way to lower real estate taxes.
Less stress. Moving to a smaller home means a welcome respite from the tedious burden of looking after a large yard and performing repairs and household chores that come with owning a large property.
Greater flexibility. Fewer responsibilities and a lighter workload provide more opportunities to take vacations, start new hobbies,and do other activities homeowners didn’t have time for when they still had to worry about looking after a large house.
Emotional attachment. Switching from a larger to a smaller one can be jarring at first. There’s a lot one has to get accustomed to, and it can be painful to say goodbye to old friends and neighbors.
Less space. Some people might enjoy not having to deal with a lot of furniture or bric-a-brac, while some might have a hard time letting go of belongings that hold sentimental value. There’s also the concern that the new home might not have enough space for guests, and that furniture from the old house won’t fit.
Downsizing is not for everyone. Some do it and are happy in their smaller homes, while some regret it. It’s best for homeowners to take the time to consider whether the benefits outweigh the pitfalls and discuss their options with their financial adviser or a trusted real estate professional.