I have been working with a number of families dealing with homes of their parents lately, both estates and parents moving into senior housing of some kind… which often makes the children (often ‘seniors’ themselves) also think about downsizing. I can’t tell you how many people have told me they plan to downsize BEFORE they need to, because it just gets harder the longer you wait… and they don’t want to make their children deal with their ‘stuff’, as they have been doing with their parents.
A recent study reports that 33% of people planning to sell their homes are planning to downsize. The following post from Keeping Current Matters may help you evaluate if it is time for you to think about downsizing.
In a recent blog post, Dave Ramsey, the financial guru, discussed the advantages of selling your current house and downsizing into a smaller home that better serves your current needs. Ramsey explains three potential financial advantages to downsizing:
- A smaller home means less space, but it also means less time, stress and money spent on upkeep
- Let’s assume you save $500 a month on your mortgage payment. In 30 years, you could have an additional $1–1.6 million in the bank to get you through your golden years.
- Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down! If you can’t pay cash, aim for a 15-year fixed rate mortgage and put at least 10–20% down on your new home. Apply the $500 you saved from downsizing to your new monthly payment. At 3% interest, you could pay off a $200,000 mortgage in less than 10.5 years, saving almost $16,000 in the process.
Realtor.com also addressed downsizing in a recent article. They suggest you ask yourself some questions before deciding if downsizing is right for you and your family. Here are two of their questions followed by their answers (in italics) and some additional information that could help.
Q: What kind of lifestyle do I want after I downsize?
“For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.”
Comments: Many homeowners are taking the profit from the sale of their current home and splitting it to put down payments on a smaller home in their current location and a vacation/retirement home where they plan to live when they retire.
This allows them to lock in the home price and mortgage interest rate at today’s values. This makes sense financially as both home prices and interest rates are projected to rise.
Q: Have I built up enough equity in my current home to make a profit?
“For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home.”
Comments: A recent study by Fannie Mae revealed that only 37% of Americans believe they have significant equity (> 20%) in their current home. In actually, 69% have greater than 20% equity. That equity could enable you to build a life you have always dreamt about.
If you are debating downsizing your home and want to evaluate the options you currently have, meet with a real estate professional in your area who can help guide you through the process.
This is the time of year I find myself meeting with people planning to sell their homes next year… helping put together a game plan to work on over the winter to be ready to sell in the spring. To schedule a free consultation call or text Sharlene at 612-419-0560 or email firstname.lastname@example.org.
Here is one example of a couple who worked diligently over the winter and did an amazing job preparing their home for sale, resulting in multiple offers… 4409Abbott.com