You love your house. You have raised your children here. It is an investment and you have put a lot of yourself into it. You may, however, be wondering if downsizing your home is a good choice. Do you need all of this space? Is the mortgage payment more than you want to pay?
Downsizing your home is a big decision. Here are a few things you should look at before making it.
How much space do you need?
This is going to depend on what stage you are in life. If all of your children have headed off to college, do you need a three-bedroom house? If you are in the middle of raising a family, how much space do all of you need? Can your children share a room? When you consider whether or not to downsize your home, look at how much of your current home space is used. If you have an extra den or a formal living room, do you use that space, or does it just collect items? If you find that you have more space than you need, then your home could be a candidate for downsizing.
How much home can you afford?
If you have a large home and a large mortgage payment, you may need to downsize your home. While ideally we want to have enough bedrooms for our children to each have their own space, if your budget cannot afford it, neither can you. If you are looking at a $2500 mortgage and need to cut it in half, you can try to refinance your home. If that will not lower your mortgage payment, however, you may want to talk to your children about the value of sharing bedrooms.
Will you need to replace furniture and appliances?
While a move into a smaller home may seem nice for the reduced mortgage, consider whether or not the furniture you have will fit in the new home. Replacing a bed or a sofa is not that big of an expense. Replacing multiple rooms of furniture or even appliances can be. Make sure that your moving budget can cover those expenses. While you will still save money in the long-run, you want to make sure you have what you need in the short term. Replacing furniture and appliances is not necessarily a reason not to downsize, but it may mean taking extra time to save money for the additional purchases.
Can you afford to sell your home?
For homeowners today, this can be a tough question. When the real estate bubble burst in 2008, it left many homeowners owing more on their homes than the homes were worth. While housing prices have picked up in some areas, not everyone has recovered the equity in their homes. If your new home is still worth less than your mortgage, selling to downsize can be though. You have options, and you will want to explore them with a Realtor to see what the best move is for you. It is important to know how those options will affect your ability to purchase a new home and how those options will affect your expenses. For example, if your lender allows you to short-sale your home – that is sell it for less than the house is worth – you still have to make up the difference to the lender, typically in the form of a loan.
Whatever your reason for downsizing your home, it is a big decision. These are only a few of the questions you will want to ask yourself to make the right choice for your family.
Have you every considered downsizing to save money? Did you do it?
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