There may come a point in your life when you start to think about shedding some square footage and downsizing to a smaller home. Downsizing can have several benefits. Not only can it mean lower housing costs, but also, less work with regard to maintenance.
[READ: How to Decide Where to Live.]
On the other hand, downsizing can pose its share of challenges. It can be difficult to adjust to a smaller amount of living space, even if you’re an empty nester whose children have grown up and moved out. And downsizing could mean having to move to a new neighborhood where you don’t have the support system you once relied on.
With all of these points in mind, here are some do’s and don’ts to stick to in the course of downsizing.
Do Consider the Savings Involved
Downsizing is somewhat common among older people and retirees who no longer have children living at home. But these days, younger people are also looking to downsize to save money on housing at a time when inflation is making life overwhelmingly expensive.
Justin Draplin, CEO of ECLIPSE Cottages, says, “We’ve started to see more of a push here at the end of 2022 of people looking to downsize and purchase tiny cottages. We’ve seen different ages also downsize.”
Downsizing to a smaller home could not only shrink your mortgage payments, but also help you lower your peripheral housing costs. These include property taxes, insurance, maintenance and repairs.
Do Consider Today’s Market
While downsizing could be a cost-saver, today’s real estate market sorely lacks inventory. And that means it may not be as easy to downsize into the type of home you want. That could prove problematic from a logistical and emotional standpoint.
Ari Rastegar, CEO of the Rastegar Property Company, says, “Make sure that the place that you are downsizing to still fits your basic human needs and a little bit more.” Otherwise, you risk falling victim to what he calls “subconscious claustrophobia.”
Given the state of the housing market, try to be flexible with your timing if you’re looking to downsize. Waiting for real estate inventory to increase could work to your benefit.
Do Research HOA Fees and Rules if They Apply to Your New Home
Many people who downsize move from a detached home to a townhouse or condo. These are commonly found in housing communities that are subject to homeowners association dues and rules.
If your goal in downsizing is to save money on housing, you’ll need to make sure your HOA fees are reasonable and fit into your budget. And you’ll also need to make sure the rules you’re facing don’t restrict your lifestyle. Some HOAs dictate which types of pets you can house and whether you can run a business from home, so you’ll need to make sure those rules are manageable for you.
Do Consider the Cost of Storage if You’re Downsizing Temporarily
It’s not just retirees who might seek to downsize. If you’re looking to move to a smaller home for a few years to save money and shore up your finances, then you may not want to get rid of your furniture and belongings that don’t fit into your new home.
In that case, you’ll need a place to put everything, so make sure to research storage costs before moving forward. You may be (unpleasantly) surprised at how expensive storage is.
Move.org reports that the average cost to rent a storage unit is about $190 per month. But your costs will hinge on where you live and how much stuff you have.
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Don’t Assume Downsizing Will Always Save You Money
Downsizing could save you money, especially if you already have a paid-off home and can buy a smaller one mortgage-free. But if you’ll need a mortgage to finance the purchase of a smaller home, you could get stuck with exorbitant borrowing rates due to today’s environment. And when you’re looking at potentially doubling the interest rate you’re paying on your mortgage, it could result in little to no savings.
Plus, home prices are just plain up in most markets. So that combination of factors makes downsizing a less attractive option from a financial standpoint.
“In some cases, the savings of downsizing isn’t worth it due to the rising cost of housing at this time,” says Jeb Smith, Real Estate Broker at Coldwell Banker Realty. In fact, Smith says, “Many boomers are choosing to stay in place as it no longer makes as much sense (to downsize) as it once did with higher prices.”
Don’t Forget About the Financial Benefits of Owning a Larger Home
It commonly costs more to heat, cool and maintain a larger home than a smaller one. But do remember that it may be possible to monetize a larger home.
If you’re sitting on several floors of living space, you may have the option to rent out a basement or upper level you aren’t using. You may even be able to rent out a parking space if you live in an area where parking is hard to find. It won’t necessarily be easy or possible to monetize a smaller home.
[READ: How to Convert a House to a Vacation Rental.]
Don’t Underestimate the Mental Benefits of Downsizing
Many people focus on finances when thinking about whether to downside. But not having a large home to fix and maintain could take a load of stress off of your plate.
“When you think with anxiety about having to clean that room you never use, it’s probably a good time to consider downsizing,” says Draplin.
Don’t Assume You’re Stuck in a Smaller Home Forever
Whether you’re downsizing as an empty nester or as someone in search of cost savings, the smaller home you move into isn’t necessarily the same home you’ll live in for the rest of your life. If you’re retired and move to a smaller home that doesn’t end up working for you, you can consider a move once the housing market is more buyer-friendly. And if you’re downsizing to save money, remember that you can always upsize again once your financial circumstances change.
Any time you make a move, you take on a certain amount of risk. If downsizing doesn’t end up being a good situation for you, know that you still have options and aren’t stuck in your new home forever.
[See: The Best Places to Retire in 2022.]
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The Do’s and Don’ts of Downsizing Your Home originally appeared on usnews.com
Update 12/14/22: This story was published at an earlier date and has been updated with new information.
