Making the Decision to Downsize
Prior to deciding to downsize it’s best to first weigh the pros and the cons of downsizing your home. It’s true sometimes downsizing isn’t a choice due to circumstances that make it impossible financially to stay where you are such as divorce, job loss, being widowed, etc. In other cases it is a lifestyle choice. Careful consideration is in order to assess the pros and cons to downsizing to ensure you are making the right choice for you.
Whether it be a choice or a necessity, downsizing is often associated with life transitions and some are more difficult and painful than others. While there are many benefits, moving from a larger home to smaller one is not without costs that can be both financial and emotional. This article covers some of the major benefits and other considerations of downsizing your home.
Major Benefits to Downsizing Your Home
The five major benefits of downsizing your home include paying off your mortgage if you still owe a balance, eliminating debt, giving your retirement fund a boost, living more affordably, and managing new priorities. Let’s delve into these benefits a little more.
1. Pay off Your Mortgage
Selling your home and purchasing a smaller one for less means you will have proceeds your can put toward your retirement rather than mortgage and interest payments. If you have lived in your house a long time and have paid off the mortgage, even better!
2. Eliminate Other Debt
Millions of people in Canada have lines of credit and credit card debt. By downsizing your home the lower cost of operating a smaller household could help cut your mortgage, credit card debt or other money you have borrowed.
3. Give Your Retirement Fund a Boost
Purchasing a smaller home can help you achieve your retirement savings financial goal. A new, smaller and less expensive home can help you either entirely eliminate or lower your mortgage payment allowing that extra money to go toward your retirement savings.
4. Live More Affordably
Downsizing your home and/or decreasing your monthly household bills can also make your current living expenses more bearable. A smaller home may mean less upkeep, lower energy bills. less money spent on property taxes, and a smaller amount spent on home management and maintenance. All of the above can generate serious cash that you could instead put toward children’s education if you are still raising children, or your retirement. If already retired, it could be used for travel, recreation, or health-related expenses.
5. Manage New Priorities
You may also want to downsize for reasons other than boosting your retirement funds. People often decide to move and downsize because they’d like to move closer to family, or they’re feeling the effects of an empty nest, job loss, or a divorce. In other cases, the desire to downsize your home may be aligned with wanting a smaller, more eco-friendly home or the need to accommodate aging- or health-related mobility issues that require a home that is easier to get around. All of these reasons could be excellent motivating factors.
Potential Costs and Other Considerations Associated with Downsizing Your Home
Before going forward with the decision to downsize, consider weighing the following factors.
1. Hidden Costs
Downsizing may mean a smaller mortgage payment, but could also be other costs involved. For instance, you may need to make home repairs before listing your home on the real estate market.
You may also need to think about the expense of new furniture. The furniture you currently have in a larger home may not fit to scale in a smaller home. In addition you’ll need to carefully review current and potential property taxes, home insurance, utilities, and maintentance fees, including condo fees if you are thinking of buying a home in a condominium community. If any of the these costs significantly increase with a new purchase they could cut into the cash you’re hoping to make by downsizing your home.
2. Long-Term Needs
Think about all of life’s changes ahead. Will you be able to maintain your lawn, your eating and plumbing systems? What if you or your spouse become unable to climb stairs, woud your current 2-storey home make sense? If the answer to these questions is “no,” then it would make sense to downsize. However what if a future change meant you had to take care of an aging parent or relative. Would a new, smaller home enable you to do that?
Thinking about these questions can be emotionally taxing, but helpful for you to determine if you need to downsize. It can also help you understand if you need to do it even sooner than you’ve planned.
3. Your Motivation
You may want to stay put, but it’s best to reflect on your current and future needs and allow them to drive your decisions. Would choosing to stay be motivated by your belief that your larger home is a reflection of you and everything you did to attain it? Does the larger home imply more status and that is important to you? If the emotional cost of giving up more home that you need seems too high for you, try to remember that the status of your larger home won’t pay the bills in retirement.
4. Your Feelings
You may be thinking that moving to a new, smaller home is the way to go, but your heart may be advising against it. Your heart is likely guided with countless memories you have built in your home. This is hard for everyone to process, and more than likely even more difficult if the reason for downsizing is following a divorce, or death or a spouse.
It may be helpful when processing your feelings to remember this one simple truth: your memories don’t disappear when you move to a different home. You just get to build new memories with those you love, regardless of where you live. Understanding the emotions of downsizing and how common they are can help you process your feelings and not feel alone.
5. Letting Go of Your “Stuff”
Just like finding it hard to leave a home where you have built memories, parting with things you’ve likely accumulated in your home over the years is equally challenging when they have sentimental meaning to you. While it’s not easy to just “get rid of it,” de-cluttering is essential before moving. However, If something does have special meaning and you’ll have a place for it in a smaller home, by all means keep it! If not, but you’d like to see someone you know have it, ask if you can pass it on to them.
Another way to feel good about letting go is by donating items that are in good shape to people in need either directly, or through charities that support them. Another options is to consider selling them; a little cash may help take the sting out of the time and effort it takes to part with belongings you have when decluttering. Read more at Decluttering: 8 Best Consignment Shops in the GTA West.
Taking Action
To help you further weigh the pros and cons of downsizing your home and moving forward, please consider requesting a copy of my Ultimate Downsizing Guide by completing the request form below. This guide provides decision making tools and a step-by-step plan. I’m also just a text/call (416-889-8453) or email away (jane@janemccarthy.ca) from assisting you with any questions you have about downsizing, the GTA West real estate market, and more. I look forward to hearing from you and helping you with what you need!,
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