The kids are married with their own families and you have a lot of extra space in your home. You also have a lot of mortgage left and might be tired of cleaning rooms you don’t use. It might be time to downsize your home. In addition to having a home that is easier to clean, you’ll realize many financial benefits of downsizing your home. And, if you are retired and on a fixed income, or you plan to retire in the next year or two, your pocket will thank you for making the decision to downsize.
1. Paying Off Your Mortgage
One of the biggest downsizing financial benefits is paying off a huge mortgage. Even if you have a new mortgage for the smaller house, that mortgage will be smaller. You may also get a better interest rate than the rate you had on the old mortgage. If you have enough equity in the house you are selling, you could have a house without a mortgage payment.
2. Clear Up Debt
You could downsize house to get out of debt, too. One of the financial benefits of downsizing is being able to pay off some or all of your debt. In addition to paying off your mortgage, you may also be able to pay off credit card debt, outstanding medical bills and other liabilities such as your vehicles. Clearing debt releases a large burden on you and frees up money so that you are able to enjoy yourself instead of working longer than you need to.
3. Reducing Monthly Expenses
Are you still asking yourself, “Should I downsize my home?” Are you still wondering, “When is the right time to downsize your home?” In addition to getting rid of a big mortgage and clearing up some debt, you will be able to reduce your monthly expenses, too. A smaller home takes less energy to heat and cool, plus you’ll most likely use less light, you may have a smaller yard to water and maintain, and you’ll spend less maintaining a smaller home.
4. Other Benefits to Downsizing
Downsizing home to save money for retirement brings about many factors to think about. If it looks feasible to downsize on the financial side of the picture, you still have to look at the rest of the picture. Do you plan on starting a small business after retirement? You may need that extra space. If you plan on having relatives stay over often, you may need that extra bedroom. If these types of benefits fall in line along with the financial benefits, you have answered your own question of “Should I downsize my house and pay off debt.”
5. When You’re Ready to Sell
Doing your research about selling your house is just as important as doing the research on buying a house. You’ll want a good realtor to showcase your home. You need to know what the closing costs are for selling your home. In most cases, closing costs, including the realtor’s fee, costs about 10 percent of the value of the home.
Always have all of the documents you need for closing ready for the closing. As a seller, you don’t have as many document requirements as a buyer, but you should still be prepared. If you are doing a double closing – that is, closing on the house you are selling, then immediately closing on the house you are buying, have everything ready for both closings.
Understand seller’s concessions. These could make or break a deal. For example, a buyer may want you to pay his closing costs. If you refuse, you could lose the sale. Other concessions include repairs that may need to be made. You could make the repairs yourself or you could decrease the cost of the house by the amount of each repair estimate.
For more information about downsizing your home for retirement, contact On Point Carolina Realty to speak with one of our agents.