Reasons for downsizing your house
What is downsizing?
Downsizing is when you buy a home that is smaller than the one you currently have. This is often a decision made by those who now have an empty nest, find it difficult to keep up with the maintenance of their home, or find it difficult to manage the associated costs.
It could simply be that you want a change, you want to simplify your life, you want to be closer to your friends or family, or you want to start a new phase in life. While many people have tried increasing their size throughout their home buying journey, downsizing can offer many options!
Why is downsizing necessary?
Previously, downsizing a house was reserved for those whose children had grown up and left home. But more and more people are choosing to downsize due to a wide variety of situations, including the ten popular reasons below.
1. The property is too big
A large property involves a lot of cleaning, gardening, and general maintenance, and for some it may be too much. Having a property that is too large for your needs, perhaps because your children have moved, means spending time looking after parts of a property that are no longer in use.
2. Reduce the costs of daily living
The downsizing can mean that many people can live without mortgages, as well as reduce other costs of living, such as utility bills. These savings can be used to live in retirement, in a savings fund, or spent and enjoyed.
3. To finance retirement
People approaching retirement age often view downsizing as a way to finance their lifestyle or allow them to retire early. For some this money can be used for daily life, for others it is used as a way to pursue a dream like traveling into retirement.
4. Financing the children by university
The rising costs of enrolling a child in college mean that some parents are now downsizing the family home in order to finance their education.
5. Pay off debts
For people who have large debt that they cannot pay, or that affects their lives in one way or another, downsizing their homes is a viable way to pay off debt and save money.
6. Buying a second property abroad
Buying a property abroad is a dream for many. Some people make this dream come true by downsizing their property.
7. Lower environmental impact
There are a growing number of people who are downsizing their properties because they are concerned about the impact of their large home on the environment. A smaller property reduces the carbon footprint and minimizes energy consumption.
8. A simpler life
Downsizing can offer a simpler life with less clutter and personal belongings and more free time. Moving to a larger home requires that you empty out all the possessions that you have accumulated. It also means less time spent cleaning and maintaining the property or garden.
9. Break the relationship
Sometimes the reasons for downsizing are forced. When a relationship breakdown occurs, it often means that the share house is sold and both partners have to find a smaller property.
10. Avoid having too much capital tied up in a home.
Having all of your money tied up in a property can be a concern for some people in case they need to access more cash quickly. It could be the result of a sudden illness, a housekeeping problem, or a layoff. Some people downsize and put the freed money into a “rainy day” savings account or invest it elsewhere.
A downsizing checklist
- Consider your reasons for downsizing? Is it necessary, are you satisfied with it or is there another solution?
- If you can’t wait to downsize, think about where you want to live. Do you want to stay in the same neighborhood, move to the beach or buy a luxury apartment in the city center?
- Look at what types of properties would work for you and if you can afford them. Do you have to compromise or do you have many options?
- Determine if you want to pay off your mortgage in full before selling the property.
- Start throwing things away: donate, give items to family members, and separate the things you really love and care about from the things you don’t really need. This is your chance to erase everything and save money paying for your moves.
- Prepare Your Home for Sale
- Start viewing properties
What are the advantages of downsizing?
There are many benefits to downsizing your home. First, if you’ve been in your current home for a while, it’s likely gone up in value and you may be about to pay off your mortgage, if you haven’t paid it off in full.
Buying a smaller and cheaper property will give you a large amount of capital, which you can use for whatever you want. It also means you can buy your new home as a cash buyer, giving you more options, a faster chain, and the ability to live without mortgages.
Downsizing a smaller home means less maintenance, lower bills, and more time to do the things you love. It is an exercise that saves time and money.
If you downsize later in life, that means you can choose a property that is better suited to your needs as you age. Instead of having to deal with your stairs, limited accessibility, or a large garden that needs maintenance, you can choose a property that can work for you.
Why wouldn’t you downsize?
Some people have gotten used to a house of a certain size and space, and perhaps nothing they look at is really attractive. It can be difficult, after years of aiming for more space, to decide to move to a smaller location. Maybe it all seems eccentric, or you can’t imagine how you could one day put all your things on a smaller property. It is natural to be resistant.
There is no real need to downsize if you object to the idea, but you can often provide a better quality of life with the money you make from the sale. If you really don’t want to leave your home, but do want to access the value of your property, you may consider a capital release.
Property values change over time, which should be great if you’ve owned your property for a while. You may find that your property has increased in value and you should have many more resources to work with when shopping for a new home. However, just because you want a smaller venue doesn’t necessarily mean you want to change your location. You may have a hard time finding a smaller property in your area or think that even the smallest houses are too expensive for you to really benefit from the sale.
If you want to be in the same neighborhood or close to family, you may find that there are not many downsizing opportunities.
Lack of availability can be another problem. Bungalows, once considered the best option for those entering later in life or having accessibility issues, are hard to find now. They are rare as they take up much more space for one floor, compared to multiple apartments that can be purchased on the same site.
As such, it can be difficult to find suitable housing.
When should you downsize your home?
People are shrinking for various reasons. While for some it may be an empty nest and a home that requires too much maintenance, for others it may be loneliness, divorce, accessibility, or the loss of a loved one that prompts them to move.
You can downsize at any time, but it’s worth researching where you want to live, what type of property you’d be happy with, and being realistic about how much you own.
Some are still planning to downsize, but may be surprised at how much they have accumulated in their homes over the years. Once you’re considering moving, it’s time to start figuring out what you want to keep. Anything that can be thrown away or given away, do it before you even put your home on the market.
If you’re downsizing due to divorce or a change in your financial circumstances, it can be frustrating to have to contend with a smaller space than you’re used to.
Should you downsize your home?
Before you take the plunge and downsize, it’s important to figure out how much it will cost you. There are many costs associated with moving, such as legal fees, stamp duty, and real estate agent fees. All of these costs can affect how much money you will have at the end of the sale.
You should also consider your reasons for moving and talk to your family or friends about your decision.