5 reasons to downsize
- Economic necessity – It’s common for many older adults to be faced with unexpected medical expenses and rising home insurance premiums and utility costs. Selling your house and moving into a more affordable space is often the most practical solution.
- Health concerns – Many seniors downsize to a home where at-home care is more widely available and there are fewer everyday obstacles to contend with, such as stairs or other mobility constraints. The quality of and proximity to hospitals could be motivators, as well, along with access to public transportation, especially if driving has become an issue.
- Convenience – If you’re tired of doing all the housework that comes with a larger home, you’re not alone. A lot of retirees choose smaller homes where upkeep is less expensive and taxing.
- Relocating for retirement – If you intend to retire out of state or even out of your current city, downsizing in your new location could be part of those plans.
- Seller’s market – Even if you’re facing hardship right now, you’ll likely be able to sell your current home for top dollar. If you’ve been living there for a while, that means you’ll be in a position to walk away with a good chunk of change, enabling you to buy a smaller home and use the remainder to pay off debt or get out of a shaky financial situation.
Budgeting for a downsize
Choosing to downsize to a smaller home in retirement isn’t always purely a financial decision. Even for higher-net worth retirees, downsizing can be a practical move. A smaller home, particularly in a multi-family building or development, can be far easier to maintain than a single-family house on a sprawling property. This can be a priority for people as they age and are less physically able to take care of a larger home.
Whatever your motivation, it’s important to be honest about your finances and budget in advance. Here are some questions to ask:
1. What are you paying now? What will you pay in a downsized home?
Make a list of all the expenses associated with your current home. It should include your mortgage payment, utility bills, maintenance costs, HOA fees and anything else you pay related to housing on a monthly basis. Compare those numbers to what you expect to pay in the same categories in your next place.
If you still expect to take out a mortgage when you move, you’ll want to figure out the monthly payment for your new home — Bankrate’s mortgage calculator can help you crunch the numbers.
If you’re thinking about moving out of state, take a look at the U.S. Energy Information Administration’s recent data on average monthly bills for single-family homes by state. If you’re downsizing but also moving to a state where energy costs are higher, your overall savings may not be as great as you’d hoped — you could be trading a heating bill for an air conditioning bill, for instance. However, differences in energy costs can also work in your favor, so it’s worth doing your research.
