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Pros/Cons of Downsizing Your Home

Thinking of downsizing your home? You're not alone. Smaller footprints offer a number of benefits. Whether you want to worry about less upkeep, you're an empty nester, or you'd like to save money on housing costs, downsizing offers an attractive option.

Read on to discover the pros and cons that come with downsizing your home.

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Pro: Financial Benefits of Downsizing

For many, financial benefits represent the most important advantage. Moving to a smaller home can potentially result in some savings.

Let's start with equity. If you've lived in your current home for some time, you may have some equity stored up. Selling your existing home and purchasing a smaller, less-expensive home can free up that equity, giving you more financial options.

If you don't have much equity left over, a smaller home may simply cost less. Lower mortgage payments, as well as lower property taxes and homeowner's insurance costs, could put money back into your pocket.

As an added benefit, you may pay less in repair costs and utilities, as well.

Con: Potential Hidden Costs of Downsizing

A smaller home may minimize mortgage payments... but don't get blindsided by hidden costs.

Consider that you may need to make repairs or upgrades before you sell your existing home. Of course, upgrading a bathroom or kitchen is an optional undertaking (albeit one that can net you more profit on your home sale). But some issues, such as roof or foundation damage, usually have to be fixed before selling a home. These repairs can be costly.

Then there are costs associated with the home sale itself. Expect real estate commissions, potential closing costs, and other fees to eat up about 10 percent of your sale proceeds. You may be on the hook for capital gains taxes, as well.

Other potential hidden costs may include:

  • Moving expenses
  • Furniture and appliances sized to fit the new house
  • Potential HOA fees
  • Storage for items that don't fit in your new home

Pro: Less Upkeep

Less upkeep is an attractive benefit for many homeowners. Perhaps you want to travel more, and your current property needs constant maintenance. Maybe you no longer have the energy to do the hard physical work a large home and yard require.

Whatever the reason, moving to a smaller home will likely reduce the time, effort and money you pour into upkeep and maintenance. This is even more true if you decide to move into a condo community or a newer build.

Con: Less Space

If you've lived in a large home for a long time, your first reaction to the thought of downsizing may well be anxiety... specifically, worry about where to put all of your stuff.

To take a "glass half full" approach, less space means less room for clutter. Downsizing offers the perfect opportunity to get organized and do a purge of all the things you've accumulated that you no longer want or need. (Bonus: Make some extra money for the move by selling unwanted items).

Either way, living in a smaller home presents a logistical challenge. It may mean being mindful about purchases, and accepting that you'll face trade-offs in what you can keep and what you'll need to get rid of or store.

Less space may also mean embracing a cozier (a.k.a. less private) lifestyle. Family members will have to spend time in close quarters, rather than spreading out in different rooms. Of course, whether this is a pro or a con depends on the specific situation.

Downsizing offers both benefits and disadvantages. The key lies in balancing these pros and cons when deciding what makes the most sense for you and your family.

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