There comes a time when downsizing your home makes sense. It could be having the kids embark on a life of their own. On the other hand, you may have finally decided to rid yourself of debt. Whatever your reasons may be, downsizing your home requires careful planning and consideration.
Mistakes When Downsizing Your Home for Retirement
Here are some common mistakes many make when downsizing a home.
#1 Not Setting Goals
As with any significant life decision, having a solid plan helps guide your choices. You can start by listing your goals and reasons for downsizing, which can include the following:
- Reducing/eliminating debt.
- Boosting retirement funds.
- Reducing home maintenance costs.
- Lowering the cost of living.
Identifying your goals and reasons for downsizing serves as a guidepost for your decisions. For example, if you’re looking to enter retirement free from debt, you might focus on getting the most value out of your home, which could include inexpensive renovations that boost your property’s value.
Whatever your motivations for downsizing, taking the time to ponder them will help you craft a solid strategy. Check out this blog to learn more about buying and selling homes.
#2 Overestimating your Current Home Value
Making this mistake can throw off your entire plan from the onset. Don’t rely on what former neighbors claim they made from selling their homes. Instead, perform due diligence and utilize available online tools. For example, many websites provides updated information on the value of homes in your area. Major banks also have online estimators that help estimate a home’s worth. Using these tools will give you an idea of what to expect when you decide to put your home on the market.
Additionally, you can consult local Realtors or hire an independent appraiser. Multiple opinions and estimates give you a reasonable idea of your home’s value.
#3 Underestimating the Cost of a New Home
Similarly, you can be overly optimistic about the price of a new home. To set realistic expectations, use website tools to determine the value of prospective homes.
This endeavor becomes more challenging if you’re looking to move to an entirely new area. If you limit your considerations to the price of a home, you can overlook other factors affecting the quality of life. Many retirees have made this mistake only to go through the inconvenience of relocating again.
If you have the fortitude to do so, you can rent first. Living in an area minus the long-term commitment will give you a good idea if the new location is perfect for retirement.
#4 Overlooking other Associated Costs
The prospect of starting a new phase of your life is undoubtedly exciting. However, this eagerness can lead to overlooking other costs associated with downsizing, such as:
- Research possible tax implications of selling your home. Similarly, your new home could come with property taxes and HOA fees.
- Repairs and Maintenance Costs. When searching for a new home, you may seek a move-in-ready home that does not require repairs.
- Closing Costs. Remember that there are costs associated with selling your existing home and purchasing a new one. These can include the real estate agent commission to sell your current home and closing costs to buy a new home.
Of course, there will also be moving costs involved. These underlying expenses are why you need to have a solid plan when considering downsizing.
#5 Not Considering your Lifestyle Needs
Downsizing doesn’t always mean you need to sacrifice your lifestyle requirements. For example, when looking for a new home, consider the features you’ll need for the things you enjoy. This could be space for a garden, a garage, or storage for your hobbies. Whatever it is, don’t skimp on the things you love. These will be what makes retirement worthwhile.
#6 Moving with Clutter
If there’s one good thing moving brings, it’s the opportunity to declutter. Downsizing, in particular, requires you to go through your belongings, let go of some things, and consequently declutter so you can enjoy a simpler lifestyle.
Final Words
Downsizing entails plenty of things to consider. So, before the prospect of paying off your mortgage or boosting your retirement funds get you excited, do your research, and crunch the numbers. This process will illuminate the best course of action to ensure your next move results in your desired lifestyle.