Is your mortgage payment taking away from other things you’d rather spend money on? Is your home becoming a “money pit” with repairs and updates being needed? Do you really need all that space to live comfortably?
While downsizing to a smaller home might seem like a step backward, it could be just the ticket to really enjoy retirement and your later years. Instead of spending money updating the kitchen, you could be traveling or buying a boat or RV. Or you could be padding your retirement income by investing more.
Is the money pit getting deeper?
Your mortgage payment is something you expect to pay, but what about the hidden costs of owning a home? Does your home need any repairs to get it market-ready or to keep it livable? It could be that downsizing will save you big bucks over the course of many years.
Let’s look at your mortgage payment on that big house. What if you could live in a smaller home without a monthly payment? You might be able to use the proceeds from selling your current home to pay for a new smaller home outright, or at least make a sizable down payment and have a short-term mortgage with a much lower monthly payment.
And those hidden costs can creep up on you, especially if you’ve been in your home for a long time. Is the kitchen 15 or 20 years old? How long have you had that carpeting? You might need to spend some money on updating whether you decide to downsize or not. But remember, the repairs and updates never go away on an older home. So downsizing sooner than later could get you out of that money pit.
What’s down the road?
Look to the future and think about your priorities. Do you want to keep spending money on a big home, or maybe you’d rather put more toward financial security during your retirement years? You could use some of that money you’re now spending on your house and save it for future income needs.
An experienced real estate agent can help you determine what your home is worth and show you options for cutting costs. Then you can talk to your financial advisor about the best ways to invest that extra money. Let’s talk about whether downsizing makes sense for you!
NOTE: I’m not a financial planner or mortgage broker, but I know plenty of good ones! Ask me for a recommendation.
This article isn’t intended to be financial or tax advice, so consult with the appropriate professionals.