11 May Should I Downsize My Home?
Oringal article courtesy of Chris Hogan
Downsizing your home given the current Coronavirus pandemic may be something you need to consider. Many people are taking a harder look at their finances to better plan for the future and downsizing your home may be the best option. For some, it may even be a survival plan. You or someone you know, may be laid off, furloughed, or waiting to see if their job will last through the shutdown. Some are wondering if they should sell their homes “while it may be their last chance.” In the last few years many homeowners have seen equity in their properties rise substantially, especially in the Bay Area and the Pacific Northwest.
Chris Hogan explains reasons why downsizing your home could be a good investment strategy for you. If you drive around town, you’ll likely see new houses popping up. And they’re getting bigger all the time. Back in 1973, the average home was 1,660 square feet. Today, new homes run about 2,600 square feet in size. That may feel huge to you, especially if your kids already left the nest!
So how do you know if you need to downsize? Could it help you prepare for retirement? And why do you feel so attached to your home?
If you’ve been asking questions like these, you’re not alone. The good news is that you get to decide whether or not your home sweet home is enough—or too much—for you and your family. Here are some questions to ask and things to consider before you make any big decisions about your house.
Why Should I Downsize My Home?
People decide to move for lots of reasons, and downsizing is no different. What’s right for you might not be right for your next-door neighbor, or vice versa. Here are a few examples of why you might decide to downsize:
1. To Supercharge Your Retirement Fund.
Are you putting 15% of your gross income toward retirement? If not, lowering your mortgage payment by opting for a smaller home could move the needle significantly!
James and Christy are in their 40s with more house than they need and a retirement fund that’s hurting. Their kids have left the nest, and while the couple’s $1,900 monthly mortgage payment is feasible, it doesn’t leave much for investing. So, they have decided to downsize to a smaller home.
Their new 15-year fixed-rate mortgage has a monthly payment of $1,200. This downsize has allowed James and Christy to put that extra $700 a month toward their nest egg. After 25 years, that investing account could top $900,000. And if they wait until 70 to retire, they could end up with $1.5 million. Downsizing now sets them up to enjoy the retirement of their dreams later.
2. To Kick Debt To The Curb Permanently.
Let’s say you’re among the millions of people who have student loans hanging around their neck. If you have the average student loan debt of a recent college graduate, that means you owe around $37,000.(3) With a 6% interest rate and a minimum monthly payment of $250, you’ll be carrying the burden of that loan for 22 years. That’s a long time!
Now, if you downsized your home, cut your monthly mortgage payment by $300, and added that $300 to your monthly student loan payment, you’d say goodbye to Sallie Mae in just under seven years. On top of that—you’d be saving over $22,000 in interest!
And what if you took that $22,000 you would have paid in interest and put it into a Roth IRA for 30 years? You’d have over $380,000! That money could help cover any out-of-pocket medical bills in retirement—or be put toward other needs or dreams you might have. The point is, you’d be keeping your money in your bank instead of somebody else’s.
3. To Pay Off Your Mortgage.
Nobody likes having a mortgage payment month after month. After month. The good news is that you don’t have to stay a slave to your home loan. You could sell your current house and purchase a smaller one with cash. Imagine how much money you could be putting toward your retirement if you didn’t have a mortgage payment! Read Full Article >>
If you are looking to downsize and transition, I can help. There are many ways to help
increase your savings, revenue, and improve your financial wellness.
