Considering Downsizing Your Home? 4 Common Questions

If you are considering downsizing your home, there are many variables that you will need to consider. You want to make sure that you are making the right decision when you downsize. Here are a few questions that you need to ask in order to determine whether downsizing is the right decision for you.

1. How Much Can I Save Each Month?

Most people start considering downsizing when they can no longer afford their monthly payments. If you are considering downsizing, you need to determine whether you will actually be able to save a significant amount of money each month. When you are talking about a 30-year fixed mortgage, it would take a significant downsizing to make much of a difference in the monthly payment. Many people figure out that they can save only $100 to $200 per month by downsizing. If this is the case, you have to decide if that amount of savings justifies going through the downsizing process.

2. Can I Put Some Money in Savings?

You also need to determine if you will be able to put any money away in savings as a result of the downsizing. If you have been living in your current house for several years, there is a good chance that you have some equity built up. In this case, when you sell your existing home, you may be able to take some of the equity and put it in savings. Therefore, in addition to saving money on your monthly payments, you will also have money in savings in case of an emergency. In many cases, the savings that you can accumulate make the deal very attractive.

3. How Much Will This Cost Me?

Anyone can play around with a mortgage calculator and dream about having a lower monthly payment. However, many people fail to consider the costs that will be involved with a downsizing. You will first have to deal with approximately a 6 percent real estate agent commission when you sell your house. This can mean a significant amount of money coming right off of the top of the deal. You will then have to worry about closing costs on the house that you are selling and the one that you are buying. This will also be several thousand dollars. You will then have to also factor in the moving costs that will be involved. In addition to costing you money, this process will typically take up a lot of your time. Therefore, you should factor in something for lost productivity as well.

4. Can I Save in Other Ways?

You also need to determine if downsizing will help you save money in other ways. For example, owning a less expensive house will lower the amount of property taxes that you have to pay. You might also be able to net a significant savings in maintenance costs by getting a smaller house. Consider all of the variables involved to see if you can save in any other ways before making a decision.