Pros and Cons of Downsizing Your Home

Preparing for retirement at any age is not only challenging, it's downright scary, especially in an unpredictable economy with near-historically low-interest rates and looming recession. When preparing for retirement, the best approach is to first create your vision, priorities, and goals and then assess how much you will really need. Avoid getting caught up in the misinformation. Keep in mind these common myths, and plan your retirement with a big dose of reality (1).

One of the things you should do as you prepare for retirement is to downsize your home. Downsizing is moving from your big mansion or family home to a smaller house. It will help you save money and have many other benefits. Keep reading to learn the pros and cons of downsizing your home when you approach or during retirement.

Moving to a smaller, affordable house as you approach or during retirement can leave you with more money for other financial goals, such as paying your children's college tuition, traveling, or even investing in stocks. Typically, downsizing your home reduces your cost of living and has the following advantages;

One of the main advantages of downsizing your home is to reduce the money spent on maintenance and keeping the home in top condition. With a big home, you spend a lot of money on repairs, replacements, cleaning, and improvements. For instance, you have to pay a gardener or even invest in gardening equipment to maintain the yard. With a small home, you can maintain the yard easily without buying equipment or hiring a gardener.

When you plan to move to a smaller house, you can sell my house fast Newnan, and get a better price for the home. You can spend some of the proceeds to buy a smaller home. You can save the profit for retirement or even invest in the stock market.

The bigger the home, the higher the home insurance premium you pay. So when you move to a smaller house, you will pay less home insurance premiums, saving a lot of money annually.

Utility bills such as water and electricity bills are lower in a small home. Why? You can understand this better when you look at the HVAC system. An HVAC system will spend more energy to heat, ventilate, and air condition a larger home. On the other hand, a smaller home will need a smaller HVAC system using less energy to heat and cool the smaller space. Additionally, a smaller home will use less water due to the elimination of extra bathrooms and yards requiring watering and maintenance.

When you downsize to a condominium or senior living community with amenities like a swimming pool, gym, clubhouse, rooftop area, and play areas, you won't have to pay memberships for the gym, swimming pool, or club, hence saving money.

When you move to a smaller home, your new house may not hold all your possessions. You will have to sell some of the things you don't need or use and can't fit in your new house. Some of these things include extra furniture, clothing, appliances, and more. You will make some money in the process.

If you move to a well-organized community with maintained walkways and excellent public transportation, you will not need your car anymore. You can sell it or avoid using it more often, and you will save fuel and maintenance costs. 

Besides the many advantages of downsizing your home, it has some disadvantages:

Selling and buying a home comes at a cost. So when you sell my house fast Newnan, you will have to pay a listing fee, real estate fees, closing fees, and even taxes. When buying the new home, you will have to pay agents and closing costs. So you will likely pay a lot of money during the two transactions. 

If your current home is paid in full, you can sell it to cash home buyers Newnan or interested buyers and buy a new smaller home with the proceeds. However, if your house is not fully paid for, you will first clear the mortgage loan with the proceeds, and you may need more to buy a smaller home. You will have to get a mortgage. 

You will hire movers to move to your new home. You may even need to buy new décor, furniture, and appliances to suit the new smaller home.

When you downsize to condo apartments or a senior living community, you will have to pay Homeowners association fees, maintenance fees, security fees, and other expenses which you don't pay in your current home.

Smaller homes don't have extra space you can utilize to create a home office. The home doesn't even have an unused room that you can rent out to make extra money.

Here are some factors to think about before downsizing your home:

How diversified are your assets?

Selling your current home and buying a smaller one for cash can eliminate the need for a mortgage loan. But you should not put all your money into a home. You should diversify your investment by investing in stock, retirement funds, and other investments guaranteeing returns.

What about your kids?

If you have kids or adult children living with you, you should not downsize. However, if you are living with your spouse or alone, you can downsize.

Consider options to boost your income

If you have options to boost your income, like a reverse mortgage or renting out extra rooms, you should not downsize. 

If you are approaching or are in retirement, downsizing can be a better option to reduce your expenses, especially if you don't have kids or adult children living with you. If your home is paid off, you can sell it and buy a smaller one for cash, and you will have some profits you can invest in stocks and your retirement funds. But you should take your time before downsizing. If possible, consult a real estate agent, financial advisor, and financial planner to ensure you make the right decision.