Downsizing Your Home: Pros, Cons, and Your Next Steps

If you’re considering the pros and cons of downsizing your home, you’re in good company. Though the housing market has cooled off a bit, retirees, empty nesters, and even some families are still letting go of their large homes – and their large bills – in droves. And with good reason. Inflation has skyrocketed the cost of living, including what we pay for utilities and home maintenance. The housing crisis has also made large single-family homes somewhat antiquated, especially for those concerned about the environmental impact of living in too much space. And more retirees are tapping into home equity sooner than expected to shore up their retirement income or help their grown children or grandchildren. Whatever the reason, downsizing is clearly a trend on the rise.

As popular as downsizing may be across the world, actually deciding whether to stay in, downsize, or sell your home is oftentimes difficult. The financial, emotional, and physical impacts of retiring and downsizing can be tremendous and present unforeseen challenges. Not to mention what a bear selling a house can be, no matter what the market is doing. But there are many, many positives to downsizing your home as well! Keep scrolling for our downsizing pros and cons and a checklist to determine the next steps on your downsizing journey.   

Downsizing Your Home Pros and Cons

Weighing the benefits and drawbacks of downsizing your home can seem overwhelming at first. Read through our list to help you get in the right frame of mind to take on a decision of this size.

Downsizing Your Home Pros

1. Frees up the equity in your home for other purposes, like travel, nursing care, or expenses related to your children or grandchildren.
2. Allows you to buy a smaller, cheaper home with cash and only a small or non-existent mortgage.
3. Allows you to live in a home and/or environment suited for aging and retiring.
4. Gives you time, space, and flexibility for other pursuits and hobbies.
5. Saves money via a downsized or non-existent mortgage, smaller utility bills, smaller tax bills, and even smaller furniture.

Downsizing Your Home Cons

1. Distances you from communities and neighborhoods with which you have longstanding connections.
2. Racks up costs involved with selling, moving, and buying new furniture (not to mention capital gains taxes in some cases).
3. Takes a fair amount of time to sell, donate, or store your furniture, tools, and keepsakes.
4. Removes possibility of grown children or grandchildren moving back in.
5. Causes emotional distress in some people due to the scope of the change.

It may be helpful to use our pros and cons list as a jumping off point when deciding whether to stay in, downsize or sell your home. Cross out the ones that don’t apply and add your own. If you’re stuck, think about the advantages, challenges, and risks of each option. It may also be useful to consider the impact that downsizing your home will not only have on you but on others in your life.

Once you’re done with your pros and cons list, keep reading for our downsizing checklist of next steps. It offers a good framework for moving forward whether you decide downsizing your home is the best choice for you or not.   

Downsizing Checklist

There are a number of steps you can take to determine whether or not downsizing your home is the right option for you at this time. The following checklist doesn’t cover every aspect of this decision but can help you get organized for next steps.

• Talk to a financial planner about the implications selling your house will have on your bank account. Find out the estimated tax burden and what downsizing would change in terms of your overall retirement plans.  
• Talk to realtors about the housing market overall, as well as what you might be able to sell your house for and what you may be able to afford with the proceeds.
• Keep an eye on mortgage rates. If you’ve had a mortgage for quite some time, it may be extremely low compared to today’s rates. You should prepare yourself for the change if you’re planning on taking a new mortgage out.  
• Total all of your anticipated moving costs, including the actual cost of movers, closing costs related to your house sale, etc.
• Compare the current costs to maintain your home against anticipated costs where you’re considering moving. Include estimates for utilities, taxes, HOA fees, and so forth for your current home versus your new home.
• Start organizing and downsizing your belongings. (This is a good practice even if you ultimately decide not to downsize or sell.) 
• Check rates for nearby self storage options if there are things you want to hold on to but won’t have a place for after a move. Always opt for climate-controlled units when storing antiques and other fine items.
• Schedule time to talk to others who might be impacted by your move, including family members, friends, co-workers and bosses, and neighbors. If you’re thinking of moving to be closer to family, you may need to have a series of conversations about expectations on both sides. 
• Visit any potential destination on your shortlist during different seasons to get a feel for how living there year-round might be. Vacation communities in particular can vary wildly depending on weather and season.
• Consider your health and its implications on your current home now and in the future. Could your current home be made more accessible if necessary? Would a home with a different layout (one-story instead of two, for instance) help you age in place more successfully?

As you are probably well aware, deciding whether or not downsizing your home is the best option for you and your family can be a big task in and of itself. Our homes mean a lot to us. They hold our memories as well as our hopes for the future.

The best advice we can give you is to take the time you need to fully think through the risks and benefits associated with retiring and downsizing. Talk to anyone you know who has done something similar. Seek advice from financial planners, accountants, and realtors. Involve your family in your decision-making process – especially if the decision you make will directly affect them. Lean on your community to help guide your way, and keep yourself focused on the end picture. If downsizing means you’ll ultimately be more content, more financially secure, and more able to enjoy life on your terms, then the costs and stresses will have been well worth it.

Click through for some additional info about downsizing your home:

4 Mistakes People Make When Downsizing in Retirement – Investopedia
When Should Retirees Downsize Their Homes? – Investopedia
Should I Sell My Home Now or Wait Until 2023? –  Bankrate
Downsizing After Retirement – Acts Retirement