Wednesday, November 24, 2021 / by Raj Jaggi
Whatever your motivation, keep in mind that downsizing is a serious decision that necessitates thorough consideration of your circumstances and objectives. Here are five questions to ask yourself if you're thinking about making the switch. Hopefully, your responses will assist you in preparing for the next lifestyle and financial changes.
One of the most common motivations for downsizing is to save money. It's certainly one of the first things you looked into if you've really considered downsizing. When comparing how much you already pay for your home to how much you'll pay for a smaller home, don't forget to include in other expenses like property taxes, homeowners insurance, utilities, and even upkeep, repairs, and improvements. If you're downsizing to a townhouse or condo, you may also have to pay homeowners association costs.
You should think about these costs carefully because moving into a smaller home does not always imply that you will save money. While downsizing saves money on things like electricity and maintenance, it might also mean higher living costs depending on where you go. Not to mention the costs of relocating and furnishing your new residence. When deciding whether downsizing is a better alternative, those household costs might be a major and significant influence.
Another issue to consider is how much you'll be able to get for your home in today's market. Instead of underestimating the costs of selling a house, it's necessary to consider the big picture. There are costs such as the real estate agent's commission (unless you opt for a "For-Sale-By-Owner" or FSBO sale), real estate transfer taxes, loan payoffs, and home warranties, to name a few. You may also be forced to spend a significant amount of money on necessary repairs before listing your home, as well as expert home staging services if you need to attract more purchasers.
If you've owned your house for a long time, you've most likely built up a significant amount of equity. This means that selling your property could leave you with a comfortable nest egg to put toward a smaller, less expensive home while still leaving money to save and invest in the future. The problem arises if you sell your property and the proceeds are less than the amount you owe on your mortgage. You'll either have to use your own money to make up the gap or risk a short sale if this happens. In other words, if you have a negative equity position on your property, you may have to postpone your plans to downsize for the time being and stay there.
When you downsize, you'll have to cope with less stuff because you'll have less space. This entails downsizing your belongings and only bringing what you require rather than maintaining everything you enjoy. And, because parting with your belongings can be an emotional experience, you should think about how attached you are to them and whether you can part with many of the things you've gathered and loved over the years.
Begin by considering all of your belongings. If you insist on keeping the majority of stuff, you might want to consider moving later. Alternatively, you can rent storage space until you can figure out what items you want to keep, donate, or sell. If you believe that sorting through your possessions is a nightmare, certain businesses can assist you. However, if sifting through your old belongings seems liberating and you'd like to get rid of the many items you're holding onto for no reason, be prepared to make a plan so you can correctly figure out what you can and can't take with you to your new house.