Unless you are near to retirement and your kids have all flown the nest, it’s unlikely that you have ever thought about downsizing your home. Downsizing is generally considered to be something that people do later in life when they have no need for the extra space and want to use the equity held on their property for another purpose.
However, downsizing is something that any property owner should consider– especially a homeowner who is focused on making the most of their finances.
Downsizing may feel like a defeat, but it can actually be a huge tick in the “win” column if you do it correctly. If you’re not convinced, then read on to find out why downsizing might be the best financial decision you make…
1) People tend to think we need too much space (and we pay for it)
There’s no doubt that a large home is seen as aspirational; something we are all desperately meant to want. This means that when we’re perusing home buying information and looking for properties we want, we have a tendency to hugely overestimate the amount of space that we actually need. When we move in, we realize that that space comes at a very literal cost– namely in terms of utility bills.
The larger your home is, the more you are going to spend on electricity, water, and gas costs. Furthermore, you’re going to pay higher taxes, as well as have more areas of your home that require expensive home maintenance.
If you downsize, then you still have your own property, and your running costs are substantially lower.
2) It’s a seller’s market
Recent economic changes have led to a spike in mortgage applications; the current economy is doubtlessly favorable to sellers. The downside of this is that with every peak in the market, there’s a crash. It’s far better for the future of your finances if you sell your house at the height of one of the peaks.
If you sell now, then you stand a chance of maximizing your investment in your current property, giving you the capital to downsize and still have leftover funds to use as you see fit.
3) Smaller houses have less competition
The average American home has three bedrooms and two bathrooms, which means properties that are similar to this specification are always going to be popular. If you can move to a home that’s smaller, then you will have less competition from other potential buyers.
This should shorten your search and ensure you have the best opportunity to find a great deal. With fewer buyers available for smaller homes, sellers may be more open to offers if you’re brave enough to try it– potentially saving you a fortune.
Of course, downsizing is not going to be feasible for some families, and that cannot be avoided. However, if you have more rooms than you need — or your children can be persuaded to share a room — downsizing could be the key to your family’s financial stability.