Pros and Cons of Downsizing Your Home

Downsizing your home can give you more money to spend, save for retirement or achieve other financial goals. But before making the move to contact Baltimore house buyers, carefully consider the pros and cons.

With "tiny houses" a hot trend, more Americans are thinking about downsizing their homes. You might be considering enlisting the services of house buyers in Baltimore for downsizing if your children have left the nest, you're close to retirement, you want a lighter ecological footprint or you're just tired of maintaining a big home.

Financial advantages of downsizing your home include lower mortgage and utility costs, while disadvantages may include the cost of selling your current home and moving expenses. To help you decide if downsizing is right for you, the house buyers Baltimore have rounded up the financial pros and cons.

Choosing a smaller, more affordable home can leave you with more money for other financial goals, such as traveling, saving for retirement, building an emergency fund, paying off debt or paying children's college tuition. Downsizing your home can reduce your cost of living in several ways.

Smaller Mortgage

If you currently have a mortgage, the mortgage for a smaller home is likely to be less than you're paying now. In this case, listing your property with cash house buyers in Baltimore is an excellent move. 

More Affordable Home Insurance

The size of your home affects your insurance premiums, with smaller homes generally being less costly to insure.

Less Maintenance

Bigger homes generally need more maintenance, simply because there are more things that can break. Moving to a property such as a condo with a small yard can eliminate the cost of paying a gardener or purchasing garden equipment to maintain the yard yourself. In this case, we buy houses in Baltimore experts will help you sell quickly.

Cheaper Utility Bills

Utility bills are usually lower in a smaller home, since there's less space to heat or cool. Eliminating a yard (and lawn) can significantly lower water bills, too.

Membership Savings

Downsize to a senior living community or condominium with amenities like a fitness center, swimming pool, tennis court, clubhouse and rooftop sun deck, and you won't have to pay for gym, club or pool memberships.

Fewer Auto Expenses

Move to a community that's walkable or has good public transportation and you might be able to give up your car—along with its maintenance, payments, insurance and fuel costs.

Lower Tax Bill

Because square footage is a factor in assessing a home's value for tax purposes, property taxes are generally lower for smaller homes. Consider moving to a state with lower or no income taxes, property taxes and sales taxes to save even more. Florida and Nevada are popular choices for downsizing retirees partly because neither has state income tax.

Profit From Possessions

You'll undoubtedly have to get rid of some belongings before downsizing. Depending on the amount and value of items, you could make a profit selling furniture, clothing and other possessions online or at a garage sale.

Disadvantages of Downsizing Your Home

Moving to a smaller home also has some potential downsides, including:

Mortgage Costs

If your current home is paid off, you might be able to sell it and buy a new home outright with the profits. Depending on the sale price of both homes, however, you might need to get a mortgage. Consider whether you want that additional expense.

Costs of Buying or Selling a Home

On average, selling a home costs more than $31,000, according to data from HomeLight. In addition to the costs of preparing the home for sale such as new paint or flooring, you'll need to pay real estate agents' commission, closing fees and taxes. When buying your downsized home, be ready to pay closing costs—generally between 2% to 5% of the home's purchase price.

Moving Expenses

The cost of hiring movers can add up. You may also need (or want) new appliances, décor or furniture to fit the new space.

Potential Fees

Moving to a senior living community or condo complex could mean homeowners association (HOA) fees, maintenance fees and other expenses you don't have in your current home.

Possible Storage Costs

If your new home lacks space for sentimental items or heirlooms you can't part with, you'll need to pay for storage space to house them.

Limited Work-at-Home Options

Working remotely can open up a wider range of higher-paying jobs than you can find in your current community. A larger home with dedicated office space can make working remotely easier, potentially boosting your income. However, working from home may be difficult in a small home where your only "workspace" is the dining room table or a corner of the bedroom.

No Extra Space

Unused rooms in your current home could be rented out to make money—something you probably can't do in a smaller home.

Lifestyle Creep

Moving from a home in a quiet suburb to a condo in a bustling urban area is a dream for many. But easy access to shopping, restaurants and entertainment can tempt you to overspend until your new lifestyle eats up any savings from downsizing.

Conclusion

Preparing for retirement at any age is not only challenging, it’s downright scary, especially in an unpredictable economy, with near-historically low interest rates and looming recession. When preparing for retirement, the best approach is to first create your vision, priorities, and goals then assess how much will really need. Avoid caught up in the misinformation. Keep in mind these common myths, and plan your retirement with a big dose of reality. (1)

Therefore, before making the big decision to move to a smaller home, review your overall financial plan and consider how downsizing might help achieve those goals. Visit home sales websites and talk to real estate agents to estimate your home's value. 

Then investigate home prices in your desired area to see if your home sale can pay for the smaller house. By making the downsizing decision with all the facts in mind, you can find a place that truly feels like home.