As you approach retirement and examine your expenses, finding ways to save becomes increasingly appealing. One time-tested strategy gaining popularity is downsizing to a smaller home.
While the focus on cutting expenses often revolves around daily purchases like groceries, downsizing your home can significantly impact recurring bills such as mortgage payments, energy costs, and maintenance expenses. According to Realtor.com,
“A smaller home typically means lower bills and less upkeep. Then there’s the potential windfall that comes from selling your larger home and buying something smaller.”
This financial benefit is attributed to the accumulated home equity over the years. If you’ve been in your current residence for an extended period, chances are your home equity has grown substantially. This equity can be a valuable source of wealth for retirees, constituting a significant portion of their net worth. Daniel Hunt, CFA at Morgan Stanley, emphasizes:
“Home equity can be a significant source of wealth for retirees, often representing a large portion of their net worth. . . . Retirement planning can be complex, but your home equity shouldn’t be overlooked.”
When you decide to leverage your home equity for your next move, a real estate agent becomes an invaluable guide throughout the process. This includes determining the optimal selling price for your current house, identifying a home that better suits your evolving needs, and understanding your affordability based on current mortgage rates.
What does this mean for you? If downsizing is on your radar, consider the following questions:
1. Do the original reasons for purchasing my current house still align with my current needs?
2. Is the space I currently have a genuine necessity, or would a smaller home be a more suitable option?
3. What are my current housing expenses, and how much could I potentially save by downsizing?
Once you’ve reflected on these questions, consult with a real estate agent to explore your market options. A local agent can assess your home equity and guide you on how downsizing can position you for financial success in this new chapter.
Bottom Line
Want to save money in retirement? Consider downsizing – it could really help you out. When you’re ready, let’s connect about your goals in the housing market this year.