Is it Time to Downsize your Home?

A recent study by Edelman Berland revealed that of homeowners who are contemplating selling their house in the near future 33% plan to scale down. Let’s look at a few reasons why that would make sense to many Americans.

In a recent blog post, Dave Ramsey, the financial guru, discussed the advantages of selling your current house and downsizing into a smaller home that better serves your current needs. Ramsey explains three potential financial advantages to downsizing:

  1. A smaller home means less space, but it also means less time, stress and money spent on upkeep
  2. Let’s assume you save $500 a month on your mortgage payment. In 30 years, you could have an additional $1–1.6 million in the bank to get you through your golden years.
  3. Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down! If you can’t pay cash, aim for a 15-year fixed rate mortgage and put at least 10–20% down on your new home. Apply the $500 you saved from downsizing to your new monthly payment. At 3% interest, you could pay off a $200,000 mortgage in less than 10.5 years, saving almost $16,000 in the process.

Realtor.com also addressed downsizing in a recent article. They suggest you ask yourself some questions before deciding if downsizing is right for you and your family. Here are two of their questions followed by their answers (in italics) and some additional information that could help.

Q: WHAT KIND OF LIFESTYLE DO I WANT AFTER I DOWNSIZE?

A: “For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.”

Comments: Many homeowners are taking the profit from the sale of their current home and splitting it to put down payments on a smaller home in their current location and a vacation/retirement home where they plan to live when they retire.

This allows them to lock in the home price and mortgage interest rate at today’s values. This makes sense financially as both home prices and interest rates are projected to rise.

Q: HAVE I BUILT UP ENOUGH EQUITY IN MY CURRENT HOME TO MAKE A PROFIT?

A: “For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home.”

Comments: A recent study by Fannie Mae revealed that only 37% of Americans believe they have significant equity (> 20%) in their current home. In actually, 69% have greater than 20% equity. That equity could enable you to build a life you have always dreamt about.

BOTTOM LINE

If you are debating downsizing your home and want to evaluate the options you currently have, let's get together to talk about the process.


c29479c1 9bcb 40f9 a342 5ac9c1920ea4 f5ec5e47 0cce 4bc2 a2d7 8043d87c0834 471cd65a b642 4409 b52d 4a3092a27f57 88b0f1c6 8bbe 4ea8 8e59 98bd271d4303 8fe97011 30d4 4eac aec8 160c43433b77 a69d82c2 8733 4e63 941e 3f5fb900821f 225e2783 762a 4b87 a942 6ae74ea477b7 21e1246d ab43 4028 8fdd 593a90f6c19f b7cde0bf 7f30 4fdc b0d1 38da4fb92a15 c95527c7 33c4 49b9 b151 de95973d3569 1b83e718 f974 4771 869b ef3e35f1b805 893ad21a 8647 4e29 9296 1cd95c86b8a4 162b7014 6035 47cb 8961 dba1fda5644e 80da5ae4 1a0e 4121 925e 1f0cd160c140 d478add1 0566 41a1 b794 abe3a8cccb69 1686c9a2 12dc 4602 9425 e3fc2564d1d5 fb24de5c 6e6f 4cc7 8fea d08e8cfc6225 8d2d3995 8f22 410e a83d 34c75e3d860e 3f22ce6f b5fb 45f6 a2b4 26e4fcd96695 b5925071 4440 46b7 805e 7ef0bd606288 86f7712a d899 4bcd 990c d5d4ea1b19b1 d50c5373 8984 4004 87c0 a56d5b1a8f2f 003d9305 d44b 493c aaed 28582716a4aa