Why it May Not Always Be a Great Idea to Downsize?
Downsizing may free up some funds that you can save for your retirement days while cutting down everyday expenses. But is it actually a great idea to downsize?
If you ask a person approaching retirement to share his/her view on downsizing, there is a good chance that they have already given this thought at one point or another. Maybe you think about the day when you dreamed about buying a first home. After some time, you were fortunate enough to get into a larger house, but now the more you look around the more you think of smaller home. This could be another house, a small apartment or just a place next to a retirement community.
But just like upsizing, downsizing is not a painless or simple process, especially as much as it seems. So, if you are thinking about downsizing to save a few bucks, first ask yourself the followings.
How do you feel about downsizing?
Before you start the online research, take your loved ones or friends’ opinion or make pros and cons list; look for an honest answer to the above question. This is because, for homeowners it is not easy to move from the house they now occupy. For them, it is out of question. So if you too belong to the same group, can you imagine yourself living in some new place?
How much can you actually save?
Another important consideration that will help you decide on downsizing is to try to determine the amount of money that you can actually save at least on monthly basis. While downsizing is considered a money saving move, not every time you can save as much as you may think. Therefore, the first move should be to start looking at condos and smaller houses determine their selling price.
Use a mortgage calculator and calculate the new monthly payment. Oftentimes you borrow several thousand dollars less for the new house but you end up saving only $100 or even less on the mortgage payment. One of the primary reasons to choose to downsize is to cut down your monthly payment thus, you must ascertain if the difference in your payments between both the homes is actually worth starting the whole process of downsizing.
Have you considered the complete cost of downsizing?
Downsizing means a smaller mortgage, lower utility bills, less property tax but smaller is not equivalent to less expensive. This is particularly true when you move to an area with higher living cost. Also, there are some other expenses that you must not forget while considering downsizing.
For instance, you would need to buy smaller new furniture to fit in your house or you might need to rent storage space for all those items that you are not willing to sell.