Once the kids move out or you retire, you might not need as big of a property as you did before.
Having a large, empty house draining a hole in your retirement savings is never a good thing. Because of this, you need to know when and how to downsize your home.
Here are five big signs you can look for to see if it’s time to scale back.
You may not know when to downsize during post-retirement and as you age. Moving into a smaller space or new home takes a lot of effort in decluttering your closets, hiring movers or getting your family members to help you move everything, and convincing yourself to let go of your sentimental items and real estate.
If your new house has less space than your old home, you must eliminate some of your old stuff to maximize the living space.
For instance, your living room may be a smaller space than what you’re used to, and your dining table or sofa might not work with the square footage.
While storage units and other storage ideas can help with the moving process, you’ll be unpacking and parting with many of your belongings as you move — whether through a yard sale, Craigslist advertisement, or leaving them for loved ones to take.
It can be a long and tedious process, and while you won’t have to become a minimalist to relocate to a small space, you’ll likely face a few challenges. As such, it’s a good idea to know it’s time to move into a new space and out of your current home before you start.
If you see any of the below five signs, then it might be a good idea to consider downsizing seriously:
Every home requires a decent amount of money and elbow grease to be poured into maintenance and upkeep. You must ensure your appliances keep working, care for your yard, clean your property, and much more. That’s doubly true if you host guests regularly.
The larger your home is, the more time and effort these maintenance tasks will take. If it’s getting too tough to maintain your home by yourself, it might be wise to downsize so you don’t have to spend so much of your week picking up and dusting.
At the same time, downsizing is also a move worth considering if your house has a lot of unused space — like several empty bedrooms now that your kids have moved out and begun lives of their own.
By selling your current property, some other growing family of home buyers can make better use of it, and you can take the extra money you’ll earn from the sale for a truly excellent smaller home.
If your storage space, like closets or basements, is taken up by decorations and various other items, beginning the downsizing process sooner rather than later could be a good idea.
Alternatively, moving to an area with a lower cost of living might be a good choice if your housing costs are rising due to insurance, fees, and property taxes. Even if your mortgage payment is manageable, heading to a lower-cost-of-living area could help your retirement income stretch even further.
For example, if you pay 20% less for gas and groceries in a new area, you can use more of your retirement money for fun and family instead.
Sometimes, you may want a lifestyle change. Maybe you’ve lived in the same property for decades and are looking for a new experience every time you wake up. Or perhaps you want to change how you live, giving up your single-family home for a mobile home you can take on the road.
Whatever the case, feeling the traveler’s itch or the urge to shake things up is an excellent sign that you’re ready to start enjoying your golden years.
In addition to the above reasons, downsizing could be wise if you want to cash in on all the home equity you've built over the years.
If you’re approaching retirement age, you can use your home equity to pay off debts or bills, invest in your kids' college funds, or build up a good retirement nest egg. This could be a brilliant strategy if your retirement savings alone aren't enough to live on.
Of course, this strategy is only appropriate if you already have a substantial amount of equity built up in your home. On the bright side, selling that equity to a home equity investor like Balance could allow you to stay in the same property with lower monthly payments.
When the time comes to downsize your home, three broad downsizing tips can help make it easier.
Depending on your needs, these methods can be highly effective, especially if your goal is to stay in the same property with less clutter and lower monthly expenses.
If you want to stay in the same property but still downsize, you can sell or give away any unwanted and unneeded items throughout your house and garage.
For example, if you have a few cars but only need one, you can sell the extra vehicles for a significant profit.
Similarly, you can get rid of a bunch of unused junk and clutter throughout your property, like:
Selling or giving away all those unneeded things frees up a lot of space, plus allows someone else to use and enjoy them. You can host a garage sale or “empty nester” sale to have people in your neighborhood pick up your old things.
This can be an excellent way to recycle some of the old things from your bedroom, kitchen, and anywhere else in your house without investing in new storage options.
If your property is too large to care for by yourself, or if you would be happier in a smaller place, you can always sell your current property and downsize altogether.
You can talk with a real estate agent and ask them to look for a smaller home, such as a smaller house, a condominium, or even an apartment. In many cases, your profits from selling a single-family home could allow you to move into a very nice, high-quality smaller home with a more beneficial floor plan.
You can sell a piece of your equity to Balance in exchange for cash. At Balance, we take out substantial equity investments in residential properties by paying off the remaining mortgage and providing flexibility and cash out to homeowners.
Then, you’ll make monthly payments that include an exclusive occupancy fee and your share of the monthly expenses (like taxes and insurance).
As a result, you can typically enjoy significantly lower monthly payments, extra cash in your bank account, and remain in your home. With this downsizing method, you’ll be downsizing your financial obligations without leaving your property or abandoning your traditional home.
That’s because Balance allows you to remain in charge of the property. We’re co-owners of the property with you, sharing in the property value but not the space.
There are ways to downsize without selling the home you love. By selling your equity to Balance, you can stay in the same property while reducing your monthly expenses.
As a bonus, you can enjoy a lump sum cash payment to get current on past-due balances, pay off debt, make home improvements, and improve your financial health.
Contact us today to learn more.
Sources:
Financial Pros and Cons of Downsizing Your Home | Experian
Downsizing Your Home To Reduce Debt - Requirements & Challenges | Debt.org
Cost of Living: Definition, How to Calculate, Index, and Example | Investopedia
