Many people are at the stage in their lives where they must choose where they will live after they retire. If you’re a homeowner who is about to enter this stage, you may be wondering if a small home could be your best option. Jessica Lautz, Deputy Chief Economist and Vice President of Research at the National Association of Realtors (NAR), says:
“As we see the transition of the large Baby Boomer generation age into retirement, it will be interesting to see if they move in with their Millennial and Gen Z children or if they stay put in their own homes.”
A Smaller Home Could Be Your Best Option
Lautz offers two choices: remain in your present home or move into a multigenerational home with loved ones. Although it is becoming more and more popular, not everyone can live with many generations. And as your needs change, staying put could no longer be necessary. Downsizing is a third choice, and for some people, it’s the best one.
Downsizing refers to selling your home and buying a smaller one. Moving allows you to move to your perfect location and sometimes smaller homes are better suited to your changing demands.
In addition to the personal benefits, downsizing might be more cost effective, too. The New York Times (NYT) shares:
“Many downsizers expect to improve their retirement income stream if their new home costs less than what their old house sells for. Lower utility costs, insurance and property taxes — as well as investment returns on the proceeds — can also improve the bottom line.”
Being in a strong financial position is one of the most important parts of retirement, and downsizing can make a big difference.
The record-high level of equity that homeowners have is a significant factor in why downsizing is still financially advantageous today, even though mortgage rates are higher than they were a year ago. Leveraging your equity when you downsize might reduce or even eliminate your next home’s mortgage payment.
So, not only is it probably more inexpensive to maintain a smaller home, but using the equity in your property could also be quite beneficial. The best person to help you determine how much equity you may have in your current house and what alternatives it may offer for your next home is your local real estate expert.
Bottom Line
Choosing a place to reside is probably a component of the retirement transition process for homeowners. Let’s talk so you can explore your shrinking alternatives and understand your options.
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