The Benefits of Downsizing When You Retire
As you contemplate your retirement expenses, the prospect of saving money becomes increasingly attractive. One enduring and widely embraced strategy for achieving this is transitioning to a smaller residence.
While the typical focus when considering expense reduction revolves around everyday purchases such as groceries, downsizing to a more modest home can significantly impact associated costs. This includes reductions in mortgage payments, energy expenses, and maintenance obligations that come with a larger dwelling. Realtor.com shares:
“A smaller home typically means lower bills and less upkeep. Then there’s the potential windfall that comes from selling your larger home and buying something smaller.”
That windfall is thanks to your home equity. If you’ve been in your house for a while, odds are you’ve built up a considerable amount of equity. And that equity is something you can use to help you buy a home that better fits your needs today. Daniel Hunt, CFA at Morgan Stanley, explains:
“Home equity can be a significant source of wealth for retirees, often representing a large portion of their net worth. . . . Retirement planning can be complex, but your home equity shouldn’t be overlooked.”
When you’re prepared to leverage your home equity for your next venture, your real estate agent becomes your indispensable companion throughout the entire process. This encompasses determining the optimal selling price for your current residence, identifying a new home that aligns with your evolving requirements, and comprehending what fits within your budget at the prevailing mortgage rates.
What This Means For You
If downsizing is on your mind, ponder these questions:
- Do the initial reasons that led me to purchase my present home still hold, or have my needs changed over time?
- Is the current space I inhabit a genuine necessity, or would a smaller dwelling be a more suitable match?
- What are my existing housing expenditures, and how much am I aiming to save by downsizing?
Subsequently, engage with a real estate agent to address this crucial question: “What are my current market options?” A local real estate professional can guide you through assessing the equity in your property and illustrate how it positions you for a successful downsizing endeavor.
Bottom Line
Want to save money in retirement? Consider downsizing – it could really help you out. When you’re ready, let’s connect about your goals in the housing market this year.
