4 ways to free up your budget (and your life) with a smaller home
Does buying a smaller home mean financial freedom? It depends on your mortgage and your lifestyle. Let’s discuss the financial perks of downsizing, plus a few unexpected costs to watch out for.
The decision to downsize can be scary and liberating all at once. You may question where your adult children or guests will sleep at your smaller home. Or how your dog will cope with a smaller backyard (or no yard at all). There’s no doubt you’ll need to adjust. But on the other hand, buying a smaller home can simplify your life and free up your budget. With less home to pay for every month, you could save for the future or spend more on your favorite hobbies. Here are four financial benefits of buying a smaller home.
1. Lower mortgage costs
Whether you’re purchasing a condo, house or townhome, smaller often means less expensive. You’ll love getting a smaller mortgage bill each month. And after you sell your current home, you could use any earned equity to fund your next down payment while pocketing anything left over.
2. Lower property taxes
When you buy a smaller home, you can usually expect a smaller bill for your property taxes, too. Simply put; less square footage means there’s less to tax. However, it’s important to remember property taxes vary by location. Do your research before buying. You should know the average cost of property taxes in your new area over the last five years.
3. Lower utility bills
Are you running the air conditioning in July in Arizona? Heating a house in Alaska in March? Now you don’t have to feel so guilty about the gas and electric bills. With less home to warm in winter and less space to cool in summer, you can expect significant savings. You’ll save even more if your next home has modern windows and proper insulation.
4. Fewer maintenance costs
Keeping a home running takes cleaning, yardwork and repairs. Not only is that physically and emotionally exhausting, the cost adds up over time. With less physical space to maintain, you may save money on cleaning services, landscaping and outdoor supplies, DIY projects and more!
Hidden costs to watch for
Surprise expenses are the last thing you need in your smaller home. Don’t underestimate the cost of Home Ownership Association fees, which are charged monthly on top of your mortgage and can increase over time. It’s also important to think about the cost of living in your neighborhood and the cost of refurnishing your home. Will your current furniture fit the smaller layout? If not, you’ll need to save room in your budget.
Home, sweet home is about more than money
Despite the financial benefits of downsizing, it’s most important to find the right home for your personal and emotional needs. Some people downsize to help pay off debt, while others simply want a more manageable space. There’s no wrong way to do it. And luckily, there are a variety of mortgages designed to help finance exactly what you need.
Ready to downsize? Reach out to a mortgage loan officer in your area and they’ll help you get started.