The tricky thing about buying a home is that your needs can change over time, so a property that suits you well when you move in may not continue to do the same through the years. In fact, it's common for homebuyers to aim for as much square footage as possible in the course of hunting for properties. After all, who wouldn't want room to spread out?
Furthermore, remote work seems like it's here to stay, so as the lines blur between home and work, homebuyers may be even more apt to go heavy on square footage in the near term.
If you're living in a larger home, the idea of downsizing may have crossed your mind. Or maybe it's something you think about often. Giving up living space isn't always an easy thing to do. But if these circumstances apply to you, then it could end up being a very wise decision.
Is it the right move for you? Here are three things to consider.
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1. You can no longer afford your housing costs
As a general rule, your predictable housing expenses -- including your mortgage payments, property taxes, and insurance -- should not exceed 30% of your take-home pay. But if those costs have risen or if your income has dropped, you may now be in a position where your home has become more difficult to afford. And if that's the case, downsizing could ease some of that financial burden.
Now to be clear, downsizing won't always result in savings. If you move from a larger home in a less-expensive area to a smaller home in a pricey part of the country, you may not shave money off of your housing costs at all. But if you downsize and stay in the same area, there's a good chance your housing costs will shrink.
2. High housing costs are keeping you from meeting other financial goals
Maybe you can technically afford to stay in your home -- say, you're not spending more than 30% of your income on housing. But if housing expenses are making it so you're unable to pursue other financial goals, it may be time to dump some square footage.
Maybe your high mortgage payment and maintenance costs are preventing you from saving in your IRA or 401(k) plan. Or, maybe you're unable to sock money away for your children's education because housing monopolizes too much of your income. If that's the case, downsizing could be your ticket to meeting those objectives -- and feeling better about your financial picture.
3. You're no longer using all of your living space
It's one thing to occupy a larger home that you actually get good use out of. But if you have rooms in your home you rarely enter, that's a sign that downsizing may be in order.
It could be the case that you've just retired and therefore no longer need the home office that came to the rescue when your office building closed during the pandemic. Or your adult children recently moved out, leaving you with extra space you admittedly don't need. If that's the situation, it doesn't make sense to pay for space you're not benefiting from.
What's the right call?
Downsizing your home could be a smart money-saving move. It could also be a time-saver -- the less square footage you have, the less time you're apt to spend cleaning and maintaining your living space.
Take some time to consider the upside of downsizing. And if you really can't bear to part with your larger home, consider finding ways to make it more affordable should you decide to keep it. That could mean renting a portion of it out and having a tenant help you cover your mortgage costs and upkeep.
