Could Downsizing Your Home End Up Backfiring?

A young couple moving boxes and plants into a new apartment.

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Don't move to a smaller home until you've asked yourself three key questions.

Key points

  • Downsizing your home means moving to a smaller property.
  • Many people downsize to save money or avoid maintenance issues.
  • Your decision could end up backfiring if the circumstances aren't right. 

Downsizing your home is often thought to be a good way to free up some cash in your budget. Many people downsize if they're having trouble covering the bills or if they're getting older and no longer need the space or want the hassle of their current larger property.

However, sometimes downsizing doesn't end up paying off -- either because it doesn't save you money or because you can't live happily in your smaller property over the long term.  

So, how can you tell if downsizing is a good move or if it's likely to backfire and leave you facing a lot of regret? Just ask yourself three key questions to help you decide. 

1. Will you be able to get an affordable new home and a reasonable mortgage rate?

One of the biggest issues that could arise when downsizing is that you may not actually be able to save any money by switching to a smaller home. 

This could happen if you are unable to find a reasonably priced new place or if you can't qualify for a mortgage loan to buy one and you can't pay cash for a new property.  

With mortgage rates rising significantly this year, there's a very real possibility you could find yourself with a home loan that's much more expensive than the one you had. In some cases, getting stuck with a much higher rate negates any savings that come from buying a lower-priced house. 

2. Will your family circumstances change? 

Sometimes, you may downsize because you no longer believe you need a lot of space due to a change in family dynamics. For example, if your kids are all going away to school then you may think their bedrooms aren't needed any more.

But you should look at the long-term picture of what you expect as far as your family life. Those extra bedrooms may come in handy when you have grandkids, for example, or if your children end up having to move back home temporarily. If you have moved to a smaller space and then you find yourself frustrated because your loved ones can't visit often, you may wish you hadn't done so.  

3. Will you end up unhappy with less space?

Finally, it's important to consider the lifestyle changes that could come from downsizing. A smaller home could mean you no longer have the room to indulge your hobbies or to store your possessions. You may also have less outdoor space, so you could find yourself unable to spend time doing the activities you enjoyed in nature.

You should carefully consider how you use your space and how much room you need to do the things you enjoy. If you can't find a new property that will work for your lifestyle, you could find yourself regretting a move.

Unfortunately, once you've sold your larger house and downsized, it could be difficult or impossible to upgrade to a bigger space again -- especially if property values rise considerably and a larger home ends up out of your budget. You don't want to find yourself trapped in a smaller home that's not right for you, so carefully think through all the implications of making a move before you decide what's right for you.

Our Research Expert