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Shedding some square footage could be a smart move for one big reason.
Key points
- Many people downsize their homes once their kids grow up and move out.
- Even if that’s not your situation, downsizing could be a smart financial move in the current real estate market.
There may come a time when you contemplate downsizing. It’s common for people to look at downsizing once they no longer have children living at home. Or you may decide to downsize before that point so you can spend less on housing and divert more money to other goals, like retirement or travel.
While downsizing can pay off at any time, in today’s housing market, it makes a lot of sense. Here’s why.
Score a big profit while shrinking your costs
These days, home values are up on a national level. In fact, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index recently reported a whopping 19.5% price gain for homes between September 2020 and September 2021.
Whether you still have a mortgage or not, downsizing could be your ticket to scoring a big profit if you sell. These days, the demand for homes is high due to low mortgage rates and low inventory. And so sellers are commanding a premium for their homes.
Say you owe $100,000 on your mortgage. If you were to sell your home for $500,000, then downsize to a $300,000 home, you might not only walk away with a profit, but also put yourself in a position to buy a smaller home outright, without having to take out a mortgage. Or, you might take out a mortgage anyway to capitalize on today’s competitive rates, but end up with a lower monthly payment.
Furthermore, downsizing your home could help you save a lot of money on housing. These days, property taxes are up as a result of higher home values. If you downsize from a $500,000 home to a $300,000 home in the same zip code, chances are your property tax bill will shrink as well.
You might also save money on maintenance and repairs with a smaller home, assuming you downsize to a property that’s just as updated and in equally good condition. Plus, you’ll generally spend less to heat and cool a smaller home, so if you’ve grappled with sky-high utility bills, downsizing could help you shrink them.
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Source: https://www.fool.com/the-ascent/mortgages/articles/is-now-a-good-time-to-downsize-your-home/
