Your home is your sanctuary, but it’s also one of your biggest budgets. And after you retire, you may feel like you have more home than you need. But in this housing market, is it wise to downsize, even when a smaller home with upgraded features can cost about the same as the home you’re selling?
In some cases, downsizing is appropriate, but does not necessarily result in cost savings.maybe you can sell your house Buy something cheaper, but it may also make sense to downsize to move closer to family or reduce house cleaning.
It’s important to be clear about what you want. “Goals are very important,” says Juan Hernandez Ariano, a certified financial planner in Houston. “There are multiple paths people can take.”
Here are some situations that may be consistent with a “For Sale” sign.
Are under cash flow constraints
After retirement, you may find that price increase When combined with a fixed income, it feels a little cramped.
Hernandez-Agliano said his customers in southeast Texas are suffering from high fevers. home insurance In addition to insurance premiums due to bad weather, there are also high property taxes. “Many insurance companies are discontinuing coverage in Southeast Texas,” he says.
If downsizing is a money issue, consider all housing costs. Compare the mortgage, property taxes, insurance, and basic charges such as electricity and water for your current and future home.
One customer in Houston did the math and moved 90 minutes away, got a cheaper home and cut his homeowners insurance by 60%. “Property taxes were lower because it wasn’t a competitive school district,” Hernandez-Agliano said. “They still spent more on gas and water and had to pay relocation costs, but overall they were saving money each month.”
I live in an expensive area
If you live in an expensive city, you’re more likely to sell your home and find a cheaper one. “When you’re in a low-cost area, it’s hard to find anything even. [more] It costs less,” says David Deming, a CFP in Aurora, Ohio.
Do a little research before you jump. Inventory is low in many places, and competition for small, upgradeable homes is fierce.
To save money overall, the home you buy should be worth at least 20 percent less than the home you sell, says Diane Pearson, a CFP in Wexford, Pennsylvania.
It’s no longer safe to live there.
Depending on your health condition, you may need to: find a new home There are few stairs and the master bedroom or accessible bathroom is on the first floor.
Michael May, a CFP in Gillette, N.J., says clients who have watched their parents deal with long-term care or health issues can consider future mobility when planning for retirement. Point out that it is highly sexual. “Recently, I actively worked with a couple who knew they didn’t want to grow old in place because their house was large,” he says.
They wanted to be part of a continuing care retirement community with access to graduated levels of care as needed. “They could stay at home, but that’s not the plan,” May said.
You want to get closer to your family
Being closer to children and elderly parents is reason enough; down sizedon’t think this is a cheaper option, especially if you’re moving. hotter market.
Consider one of Deming’s clients who moved from one part of Ohio to another part of the state. “It cost her an additional $150,000 to move there so she could get a home she could afford,” Deming said.
Deming said even though it was expensive, it was worth it to be closer to her children and grandchildren. And her new city is booming. “You can’t look back,” Deming says. “Her new home has been appraised quite a bit since she moved in.”
Ready to create a new support network
Keep in mind that if downsizing means a new city, you may need to rebuild your community. Even if you move to live closer to family, you shouldn’t expect them to be your base of operations. “Are you an outgoing person who can go out and carve your own path?” May says.
You need to make new friends, find a new medical professional, and find a new gym. “It’s a tradeoff,” May says. “None of this is a deal breaker, but I think people should really think about everything else.”
This article was written by NerdWallet and originally published by The Associated Press.
–By Kate Ashford, contributor to NerdWallet. Email: kashford@nerdwallet.com. Twitter: @kateashford.
