The Benefits Of Downsizing And What Pitfalls To Avoid
So, the kids just graduated from college and have officially moved out of the family home, time to celebrate right? Well maybe, but the next question you should be asking yourself is “does it make sense to downsize”? After all, there’s no need for three extra bedrooms, not to mention cleaning and maintaining such a large house is a hassle.
If this sounds like you, then you’re in the right place! This article will explain the benefits of downsizing and will make you aware of what you should look out for to avoid costly mistakes.
The Benefits Of Downsizing
1. Reduce your monthly mortgage payment
What if you could reduce your current mortgage payment by $500 per month? What would you use your savings for?
Still, have student debt? Let’s say you owe $18,000 on your student loan. With a 6% interest rate and a minimum payment of $200 a month, you’ll be paying that loan for 10 more years! But if you use the additional $500 per month to pay down your loan, you’d trim a whopping seven years and eight months off your pay-off date.
Are your retirement savings looking a little slimmer than you expected? Invest the $500 monthly savings in your IRA and watch your retirement fund take off. After all, Albert Einstein reportedly said, “Compound interest is the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it.” Investing an additional $500 per month means that over 5 years, your savings would increase by $80,000 assuming a 10% annual return.
Another option is paying off your mortgage altogether! Use the proceeds from selling your current home to pay off your mortgage and pay cash for your next home.
2. Move closer to family
Do your kids live in another state? Downsizing could be the perfect excuse to move closer to them especially if they are planning to start a family of their own in the near future. After all, you can’t spoil your grandchildren if you live hundreds of miles away!
3. Less upkeep and maintenance
When you were younger, your goal may have been to buy the largest house you could afford but after maintaining a large house for years, you may be looking for a change. Who wants to spend all their free time cleaning such a large house anyway.
Avoid These Common Downsizing Pitfalls
1. Plan for the future
If you’re planning to downsize, make sure you are looking for homes that you will be happy living in for at least 3-5 years. The last thing you want to do is deal with the hassle of moving every couple of years.
2. Be mindful of expensive HOA fees
Downsizing may save you money on your monthly mortgage costs but make sure that your new home doesn’t come with any hidden costs such as high HOA, exorbitant property taxes or unexpected maintenance.
3. Choosing the right Realtor to sell your current home
What Are My Options If I Choose To Downsize?
Before you call up your local Realtor to put your home on the market, do some research to see what options are out there.
Not all Realtors are created equal. For example, depending on where you live, the typical Realtor commission is 6% of the sales price of your home which can amount to $18,000-$30,000 or more in Realtor fees depending on the value of your house. A popular alternative to the traditional 6% Realtor model is using 1% Realtor such as Felix Homes. Under our model, you only pay a 1% commission plus the buyer’s agent commission at closing and only if your home sells. On average, our clients end up saving roughly $15,000 in Realtor commissions compared to the traditional Realtor model.
Even though you are paying less in Realtor commissions with Felix Homes, you shouldn’t expect lower quality service. In fact, many of our Realtors used to work at traditional firms such as Keller Williams, Remax, and Century 21. Like the traditional model, your dedicated Felix Homes Agent will be by your side throughout the entire process from scheduling professional photos to marketing your home and everything in between. In fact, at Felix, our goal is to go above and beyond what a traditional Realtor would provide which is why we include a complimentary home staging consultation with an interior design consultant and promote your home on social media platforms such as Facebook, LinkedIn, and Instagram to get your listing in front of the estimated 52% of first-time homebuyers.