As life changes, your housing needs may change along with it. Whether the kids are out of the house or you are approaching retirement age, downsizing may be the right choice for you. Downsizing refers to selling your current home in favor for a smaller and more affordable property. If this sounds like a good fit for you, follow these tips:
Tips for Downsizing
Get a home appraisal
Before selling your home to downsize, be sure to get a home appraisal to find out exactly how much your home is worth.
New Housing Location
When looking to downsize, research what is best for you. Do you want to live in a city or would you prefer a rural area? Each area will come with its own costs that you will have to consider. Look for a new home in an inexpensive area. Learn about some of the more affordable places to buy a home (by state) here: NJ, PA, NY, CT, FL.
Downsizing is a great opportunity to save money. If you own your current home or have a large amount of equity on it, selling it can be a great way to earn some extra cash. You’ll also save money over time by having lower costs. Many expenses will decrease when downsizing, most notably mortgage payments, maintenance fees, and homeowners insurance costs.
Excess money earned from downsizing can be used to pay off any outstanding debt such as student debt and credit card payments. You can also put these additional funds into savings accounts or used for investing, either in retirement accounts (401k, IRA, etc.) or the stock market.
The process of obtaining a new mortgage while still under contract on your original home may be difficult. An alternative path is wait to close the sale of your current home and before continuing to purchase your new, downsized home. When doing this, you may want to consider taking out a bridge loan, but there are other options to explore. Talk with your lender to settle on a plan that works for you.