Once the kids grow up and move out, you may be considering downsizing. Here are some upsides to making the move.
Greater Cash Flow
In most instances, there are financial benefits to going smaller. If you have sufficient equity in your current home, you may have enough money to buy a new house outright and be mortgage free or reduce your monthly mortgage payments significantly. Other savings may include lower real estate taxes, home insurance, utility bills and maintenance costs. Do the math to decide whether it makes sense to downsize with the Center for Retirement Research’s Downsizing Calculator.
Better Home Layout
As we grow older, things that used to be a priority may now seem impractical. The two-story house with extra bedrooms once had their purpose, but things change when you have an empty nest. If you haven’t ventured upstairs in a while and those bedrooms are gathering dust, it’s probably time for a change.
Look for the opportunity to buy a home designed with ease and comfort in mind. A one-story sans all those stairs will be easier to navigate in your golden years, and if you spend the most time in your living room and kitchen, seek out homes with open floor plans. You may want a garden home featuring a low-maintenance yard or a condominium where you pay fees for a pool, gym and entertainment areas, plus landscaping and maintenance.
Before You Buy Do Your Homework
Going smaller doesn’t always equate into savings, so you’ll need to do some research before you take the plunge. If you’re looking for homes in a seller’s market, you may be paying a lot more for a smaller home than you’d like to, although if it’s a highly desirable area it will make it easier to sell in the future. Also, look at the property taxes – are they higher than where you’re currently living? In addition, be realistic about the space you truly need and shop accordingly. A Realtor can help you narrow your choices and point out new or revitalized areas you might not have thought of.
Put Some of Your Savings to Work
By downsizing, it’s possible to free up extra cash to tackle important financial goals like paying down debt, boosting your emergency fund and feathering your retirement nest egg. Financial experts agree that you don’t want to go into retirement with credit card debt, so work on paying it down with your extra funds. Next, boost your emergency fund and if you haven’t done it yet, set up automatic payroll transfers to a designated savings account, preferably one not connected to your checking account. Finally, consider increasing your contributions to a tax-advantaged retirement account.
When it Makes Sense to Stay Put
Sometimes, there’s no place like home sweet home. Perhaps your house just needs some maintenance or a refresh to make it suit your current needs. With a home equity loan or home equity line of credit, you can make much-needed repairs, spruce up the interior with new paint or flooring or tackle bigger jobs such as a home or bath remodel, which can add to your home’s value.
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Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or BALANCE counselor who can help tailor a solution for you.
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