The decision to downsize your home is a personal one that depends on many different factors. Although it may be an easy way to lower your bills, it can often be difficult to leave a house that holds treasured family memories. This is especially true for those who have been in the same place for many years, perhaps even decades.
The good news is, there are a lot of benefits to downsizing. The vast majority of people do it to save money, but there are plenty of other reasons why it may be an attractive option.
If you’re debating whether to sell your home and find something smaller, here are five signs it’s time to downsize. There are many considerations for downsizing.
Maintenance is overwhelming or costly
Taking care of a house can often feel like a full-time job. From routine cleaning to repairs and improvements, all of this maintenance takes time and money. If you have a large yard, you also have to worry about landscaping or perhaps even pool cleaning.
Experts recommend putting away $1 per square foot for annual maintenance. When you take a look at your monthly spending, is this viable for your budget? If you are being forced to dip into your savings account to make repairs, this may be an indication that it’s time to downsize.
When upkeep becomes too daunting, a smaller house is appealing, especially if you need to pay someone to accomplish cleaning and maintenance tasks.
You have a lot of unused space
If your kids have all grown up and moved out, you’re probably living with a lot of unused space. Chances are, you don’t need two or three spare bedrooms, whether you use them for guests or your hobbies. Plus, once you hand over your kids’ belongings, there’s less to hold onto, making it possible to downsize more easily.
Remember, even if you’ve paid off your mortgage, you’re still spending money on utilities for all of this unused space.
From water to electricity and gas, the extra square footage adds up. Likewise, property taxes and homeowner’s insurance premiums are also higher for a larger house.
Ask yourself whether you’re really using the entirety of your space.
Retirement is on the horizon
Retirement is an exciting phase of life that offers so much to look forward to. You’ll have time to enjoy the activities you love, spend time with friends or family, and travel.
For some people, this is a perfect opportunity to embrace the life of “snow birds” and purchase two small homes in different places. Going back and forth is a great way to escape extreme weather, such as desert summers or East Coast winters.
Although retirement is something to look forward to, it does require a savvy financial plan to ensure you can live comfortably without the income of a full-time job. Selling your home is often a great way to cushion your bank account and ensure you have enough money to live the life you want for years to come.
It’s also important to consider the fact that housing price increases have outpaced inflation by 150% over the past 50 years. This is good news for retirees holding onto homes they simply don’t need anymore. Your house is an important investment and retirement is often the best time to cash out.
Your lifestyle needs have changed
If you purchased your home 10, 20, or even 30 years ago, your life likely looks very different than it did back then.
You’re probably less concerned with the schools in your neighborhood and more worried about aging in place. Even those in perfect health may have changing needs.
For example, it may be difficult to get around as easily as you once did, especially when it comes to stairs. This makes downsizing to a single-story home ideal.
What’s more, many people want to be closer to family members as they age. This makes it more convenient to get assistance with everyday tasks from grocery shopping to changing a light bulb. Plus, one of the big benefits is easier access to those you love and want to spend more time with, such as grand kids.
There are significant financial benefits
If you’ve already been thinking about downsizing, timing is everything. Are homes in your neighborhood flying off the market with high price tags? It may be a good time to consider this option.
Although the housing market can always change, there’s no denying we’re in a seller’s market and have been for quite some time! Low inventory is leading to higher home prices that make selling very attractive.
Further, it’s good to follow the 30% rule. If your housing expenses (mortgage, utilities, maintenance, property taxes, and insurance) are more than 30% of your monthly budget, it’s time to free up some cash. This is especially true if you’re finding it difficult to save or spend money on hobbies and fun activities.
Downsizing can help ease the mental burden of feeling like there isn’t enough money to go around every month.
Explore your options
Making the decision to downsize isn’t easy, but there are many ways to explore your options.
First, consider meeting with a real estate agent to talk about the housing market in your area. Find an experienced realtor who is interested in getting to know more about your wants, needs, and any concerns you have.
A real estate agent will help you navigate whether it’s the right time for you to sell by determining a realistic price estimate for your home.
Prefer to sell to a cash buyer? While it’s better to work with a real estate agent, this can be a good option if you’re facing extreme financial trouble or have a very tight timeline.
There are many companies that buy houses for cash, as well as iBuyers. The iBuyers use technology to make an initial offer that can close in as little as two weeks.
You will just need to avoid some of the common house flipping mistakes.
In most cases, they pay closer to market value than the companies that buy houses for cash.