Shrink Your Home and Save

We homeowners often dream of making changes to our homes. We may envision a remodeled bathroom, for example, or a vegetable garden in the backyard. But a less common sort of home alteration can actually make you richer: Shrinking your home.

Win now, win later
More and more people are realizing the benefits of selling their expansive manses for something a bit more cozy. The advantages include less cleaning and maintenance, lower real estate taxes, and cheaper home insurance costs.

For example, say you're currently living in a big home that's worth $400,000. If you have a 30-year mortgage at 7%, you could be paying as much as $2,650 in monthly payments. Depending on where you live, property taxes could range from $4,000 to $8,000 or more annually, and home insurance could cost you another $1,000 to 2,000 a year.

But if you move into a smaller home worth just $200,000, most of those expenses will fall dramatically. Your mortgage bill and property taxes would probably drop by half and save you as much as $20,000 a year.

But downsizing your home doesn't just give you immediate cost savings. It also sets you up for a more comfortable future in your golden years.

Don't get trapped
When homeowners get into their golden years, their needs often change. Many have held onto large, costly family homes that were well-suited to raising a family but have more room than an empty-nest couple needs. If they fail to downsize early in their senior years, many of these folks can end up trapped in these homes -- perhaps too weak or sick to deal with all of the work involved in selling and moving.

It used to be that there wasn't much point in downsizing, because if you got to the point where medical problems made it difficult to care for your home, the odds were good that you wouldn't be able to stay at home anyway. As recently as 25 years ago, nursing home facilities were just about the only choice you had to get the regular medical supervision that many seniors need.

Now, however, it's far easier for seniors to stay in their homes throughout their entire lives. If you need help for a few hours each day, you can find home health-care workers with varying degrees of expertise who are available to visit seniors. Moreover, even when your medical needs become more burdensome, these same workers can provide around-the-clock care -- all in your own home. Although this care isn't cheap, it sometimes compares favorably with extreme measures like nursing homes. And increasingly, long-term care insurance will cover costs related to home health care.

Because health care at home is a viable option, finding a more senior-friendly home to prepare for your golden years can make a lot of sense. Although size is definitely an important factor, there are some other things to consider as well. For instance, homes on several floors can become difficult to navigate as you get older and become less comfortable with stairs. Many people feel more comfortable with ranch-style homes with everything on one story. Similarly, homes with smaller, more manageable lawns are appealing.

In recent years, builders have shifted toward bigger, more luxurious homes. But by bucking the trend and thinking about downsizing, you can save thousands in home costs now while preparing yourself for a more comfortable life during your retirement years.

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