It can be a tough decision to leave your home, especially if you’ve worked hard for it or it’s the residence you’ve always dreamed of owning. But for many people, downsizing isn’t so much of an option as it is a financial necessity. And if any of these situations apply to you, it may be time for you to do the same.
1. You’re house poor
You’re house poor if all of your income is going into your home (your mortgage payments, maintenance, property taxes, and utilities), leaving you with very little money to do anything else.
This isn’t only problematic from a quality-of-life standpoint (would you like to go on vacation anytime soon?), but also from a debt-avoidance perspective. You’re one small financial crisis away from throwing your whole world out of whack. If you can’t seem to save any money because your home is eating it up as fast as it comes in, it’s time to investigate other options — like finding a less costly place to live. (See also: 8 Signs You’re Paying Too Much for Your Mortgage)
2. You’re ready to retire
If you’ve lived in your home for many years and you’ve kept up on maintenance, chances are you’re looking at a decent payout if you decide to sell. Real estate prices are on the uptick again, and you aren’t required to pay capital gains tax on the first $250,000 of your home sale if you’re single, or $500,000 if you’re married. You must have owned and lived in the home for more than two years to take that exemption.
If you got a late start to retirement savings or had to dip into that fund along the way, downsizing could be exactly what you need to set yourself up for financial success in your golden years — or at least very least, avoid poverty.
3. Your kids have flown the coop
Your decision to have children naturally dictated the type of accommodations you needed, but once they’re out of the house, what’s the point of paying for all the rooms that no one is using? If your kids give you grief for putting their childhood home on the market — a reason that many aging parents give for staying put when they should move on — suggest that they pay a portion of your mortgage. They’ll see things your way soon enough. (See also: 7 Money Moves to Make as Soon as the Kids Move Out)
4. You want a change of scenery
Nobody enjoys moving, but we all need a change of scenery every now and then. In fact, that’s all the reason you need to pack up and start fresh someplace new. If you’re fed up with the cold weather, head someplace warmer. If you don’t like the noise of the city, set up shop someplace quieter. You only live once — and the clock is ticking.
5. You want more time on your hands
Even small single-family houses require a lot of attention. From maintenance to regular cleaning, a one- to two-bedroom home can easily zap a daytime’s worth of hours from your week. Less space demands less of your attention, and that all adds up to more time for yourself.
6. You want a lower mortgage
You don’t have to be house poor to want a lower monthly mortgage payment. In fact, having the lowest mortgage payment possible while still maintaining a quality of life that satisfies you should be the goal for everyone. Sell the money pit and find something cheaper — then treat yo’self for being so savvy with your cash.
7. Your health is declining
If you’re getting older and you live in a house with a lot of stairs and levels, it’s important to consider the future and how your home fits into that. Do you want to spend money that you may need elsewhere to outfit your home to accommodate your needs as you age? It’s an option, but not a cheap one. Your best bet may be to spend that money on a ranch home or a retirement or long-term care facility where you and your family will have more peace of mind. Plus, at the latter, you’ll make new friends and play bingo. I’d like to move in right now.