Downsizing Your Home
For many homeowners, less can be more
It used to be that only retirees and empty nesters sought to downsize their homes. However, preferences among many hard-working, financially savvy families may be shifting toward smaller homes (and mortgages) in their quest for simpler, easier lives.
The recent economic downturn and the housing situation are in part responsible for this shift as consumers look for more efficient, affordable homes that will cost less to heat, cool and maintain.
Advantages of downsizing:
There are many advantages to living in a smaller home:
q Lower mortgage payments: Downsizing usually results in a smaller mortgage, providing a great deal of comfort in today’s economic uncertainty. Additionally, by downsizing your square footage, you can significantly reduce your property taxes.
q Lower utility costs: As energy prices continue to rise, the utility bills for large homes can add up quickly. By reducing the amount of square feet to heat and cool, you can save yourself quite a bit of money.
q Less time and maintenance costs: With fewer rooms to clean and a smaller yard to maintain, you’ll have more time for the things you truly enjoy in life. Likewise, the smaller space means less money required for large home maintenance costs, from new carpeting to roof repair.
q Less stress: With reduced monthly expenditures and fewer home-related demands, your level of stress is likely to lighten.
According to the National Association of Home Builders, the average size of new single-family homes grew from 1,600 feet in the late 1970s to over 2,500 square feet in 2007. Since this time, the size of newly built homes has dropped each year.
Important steps for making the transition
1. Call your lender to learn how much you need to pay off the balance of your current mortgage. If you believe you are “underwater” – where you owe more on your existing mortgage than the house is worth – talk with your lender immediately about your options.
2. Call [name of lender] to get pre-approved and set your budget. This is a critical step in buying a home and can help you identify properties in your price range. The pre-approval also validates that you are a serious and qualified buyer when you are ready to make an offer.
q If you have lived in your current home for a while and have built up significant equity, talk with [name of lender] about your financial plans. Do you want to roll all of this equity into your new home to lower your monthly payment? Or, would you prefer to keep a portion of this money in savings or another investment? We will work with you to find the right solution for your financial goals.
q Because you are downsizing, your future mortgage payment will most likely be smaller, especially with today’s mortgage rates at 50-year lows. If you are in good shape financially, you may want to consider a 15-year mortgage – enabling you to pay off your mortgage much sooner. We can advise on all mortgage options, with the ultimate goal of ensuring your success as a homeowner.
3. Reach out to a licensed real estate professional to assist you in your transactions.
q In today’s market, many opt to sell their home first, and then begin their new home search. Because this is a buyer’s market, selling your home can require a lot of time and patience; however, once you’ve sold your home, you are now in the driver’s seat as you look for your new, smaller home.
q If you are looking to buy in a neighborhood that is local to the home you are selling, you may decide to use one real estate professional for both transactions. However, if your move is not local, you may opt to use another real estate professional who has experience in the area where you are looking to move.
Downsizing your home is a big and important step, and will require a significant amount of work and time – including selling your home, looking for a new home, and “cleaning house” as you prepare for a smaller living space. But the rewards can be big: substantial cost savings and an easier, less demanding lifestyle.
Remember that with any major life change, planning is key to your success!