15 Questions to Ask Yourself Before Downsizing

Many homeowners with large properties consider downsizing at some point in their lives.

Downsizing means moving to a smaller place, and it could become necessary to lower housing costs or reduce the time and money spent on maintenance and repairs.

While downsizing is sometimes the right move -- both personally and financially -- it's not necessarily the best choice in every situation. To help you decide whether downsizing is right for you, ask yourself these 15 questions before you put your current property on the market.

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Before you consider selling your current property, you need to think about the price you could fetch for it.

You'll, of course, want to confirm that you can sell it for enough to pay off your mortgage loan and any transaction costs associated with the sale. Ideally, you'll also want to clear enough profit to cover all the costs of your new, smaller home -- or at least make a generous down payment on it.

If property values are currently down and you may not get a good price for your home, it may not be the optimum time to downsize.

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You'll also want to make sure that buying a new place is going to be affordable for you.

While downsizing usually means moving to a smaller, cheaper home, sometimes it's not always possible to find a new house within your price range -- especially if many of the small homes you are interested in are located in costlier parts of town.

If you're planning to downsize to a different location, this can create a host of other issues.

Tax rules may differ in your new area, for example. If you end up owing more income taxes, downsizing could actually end up costing you money in some circumstances instead of saving it.

A move to a new area can also mean incurring significant expenses associated with transporting your possessions long distances. You'll need to be certain you're ready for these up-front costs.

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Depending on where you're moving, you could end up facing different property tax rates on your new smaller property. You could also get stuck with higher home insurance costs if, for example, you end up relocating to a flood zone or a hurricane-prone spot.

Be sure to research all these issues to get a big picture idea of the total costs of your new property. Don't assume it will always be cheaper to buy a smaller home until you've confirmed the total costs associated with ownership.

Home maintenance is another big issue that you must consider.

Typically, a smaller home will come with lower maintenance costs because you won't have as large an area to keep up with. But if you are downsizing to an older property or one that wasn't maintained as well as your current space, you could find yourself facing higher costs over time.

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If you'll need to get a new mortgage to buy a new property, you should check current rates to see how much your home loan will cost you.

Mortgage rates have gone up considerably this year compared with the recent past. If you end up having to take out a loan at a much higher rate than you are currently paying, your housing costs may not go down much -- if at all -- even if you're taking out a smaller loan on your new home.

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Thinking about your goals for downsizing can help you to make an informed assessment about whether your move will make you happy.

If your goal is to save money, downsizing is likely to pay off only if you can find a cheaper property with a home loan that actually reduces your costs.

On the other hand, if you are moving primarily because you're tired of cleaning and maintaining a large home, you'll want to make sure your new place is in good condition and not likely to cause you more problems than your current home.

It's important to really think about what moving into a smaller home will mean and make sure you're ready for that shift.

For example, if you and your partner are both retired and have your own space to indulge in your hobbies, consider whether that will be the case after you move. If not, will you really be happy sharing a smaller space all day?

You'll also want to think about other lifestyle factors such as your commuting time and accessibility to family, friends, and recreational activities.

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There are high transaction costs associated with buying and selling. If you don't plan to stay in the new home for several years, you could end up losing money due to switching properties.

You can also get stuck with higher capital gains taxes if you haven't stayed in your home long enough before selling.

So, unless you anticipate staying put in your new place for several years, you may be better off remaining where you are.

While it may be tempting to downsize in a moment of frustration -- especially if you're tired of cleaning a large property or paying a big mortgage bill -- you'll want to look beyond your immediate needs.

If you anticipate major lifestyle changes in the coming years, such as retirement, a move to assisted living, or a change in family structure, it may not make sense to jump into a move right now.

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People often consider downsizing after their children leave home. But it's important to realize that kids can come back. In fact, this has become increasingly common. Your children could also give you grandkids who come to visit often.

If you anticipate family coming back home often, either for long visits or to stay, you may not be happy in a smaller house.

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Smaller homes can sometimes come with smaller lots and less privacy. If you enjoy gardening or having green space around you, think about what giving this up will mean.

It can be a major lifestyle change to go from having a place to sit outside to being stuck indoors, and it can be a shock to end up close to neighbors when you're used to having plenty of space.

For many people, their social life revolves around their community.

If downsizing means moving further away from family or friends or giving up neighborhood activities that you love, then you may end up unhappy in the long run.

This is especially true if you're retiring and will also be losing the social connections your job provides.

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If you have a lot of possessions you don't want to get rid of, think about whether you'll be able to keep everything that matters to you in your new space.

If you get stuck with storage costs for years to come, then a switch to a smaller home may not save you as much money as you'd hoped.

Finally, think carefully about whether your new, smaller home is going to be a place you enjoy spending time for the foreseeable future.

If you can't picture yourself being happy in a smaller space or are very sad about giving up your house, you may want to think about other ways to cut costs while staying in your current place.

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Selling your home and buying a new one is a major decision, and it's worth taking the time to ensure you're really ready.

Answering these 15 questions will help you think through the pros and cons of switching to a smaller home to ensure you make the choice that's right for you.

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