A Smaller Home Could Be Your Best Option

Many people are approaching the age when they must decide where they want to live when they retire. If you're a homeowner approaching this stage, you have a few options. The National Association of Realtors (NARDeputy )'s Chief Economist and Vice President of Research, Jessica Lautz, says:

“As we see the transition of the large Baby Boomer generation age into retirement, it will be interesting to see if they move in with their Millennial and Gen Z children or if they stay put in their own homes.”

Lautz suggests two alternatives: move into a multigenerational home with loved ones or stay in your current home. Multigenerational living is becoming more popular, but it is not for everyone. Staying put may meet fewer and fewer of your requirements. However, there is a third option, and for some, it is the best one: downsizing.

Downsizing occurs when you sell your home and buy a smaller one. Smaller homes may be better suited to your changing needs, and moving allows you to land in your ideal location.

Aside from the personal advantages, downsizing may also be more cost-effective. According to the New York Times (NYT),

“Many downsizers expect to improve their retirement income stream if their new home costs less than what their old house sells for. Lower utility costs, insurance, and property taxes — as well as investment returns on the proceeds — can also improve the bottom line.”

One of the most important aspects of retirement is having a strong financial position, and downsizing can help.

The record-high level of equity that homeowners have is a key reason why downsizing is still cost-effective today, even when mortgage rates are higher than they were a year ago. When you downsize, you can use your equity to reduce or even eliminate your mortgage payment on your next home.

So, not only is the upkeep of a smaller home likely to be less expensive but leveraging your home equity could also make a significant difference. Your local real estate advisor is the best resource for determining how much equity you have in your current home and what options it offers for your next move.

In conclusion
If you're a homeowner preparing for retirement, deciding where you'll live is probably part of the process. Work with a trusted advisor to understand your options and investigate downsizing possibilities.

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