Finances & Money

Is It Time to Move to a Smaller Home?


As housing prices continue to set new records of unaffordability, there are plenty of good reasons to consider whether it’s time to move to a smaller home.

Larger houses take longer to clean and have higher maintenance costs. Unless your family size and budget can justify those obligations, switching to a smaller home might be a smart move.

While the decision is ultimately a personal one, it’s helpful to know what the signs are that you’re ready to take the leap. Here are six indications you might be ready to move to a smaller home.

1. Your Income Doesn’t Keep Up with Housing Costs

As a general rule, your mortgage should take up no more than 28 percent of your income, including additional costs like private mortgage insurance (PMI).

When you factor in other housing expenses, like insurance and property taxes, you should limit your total obligation to no more than 35 percent. Otherwise, you can quickly become “house poor.”

If all of your current home costs combined —  for the mortgage, PMI, insurance, and property taxes — cost more than 35 percent of your income, then moving to a smaller home is a smart move. You can free up a significant sum of money by finding a less expensive house, making it easier to save, avoid debt, and cover your other expenses.

The only exception to the rule may be if you no other forms of debt and your other costs are low. However, if you anticipate financing a large purchase in the future, then downsizing will make that easier to manage.

2. Home Maintenance Costs Are Unmanageable

On average, American homeowners spend approximately 1 to 4 percent of their home’s value on maintenance costs each year. Some years they pay more, such as if a roof needs replacing, and others less. Since it is somewhat cyclic, you often have to save for big expenses over several years, allocating funds to make those costs feasible.

If your home’s maintenance costs skyrocket or you struggle to afford the necessary amount, then getting a smaller home can alleviate some of that burden. Downsizing to a property with less square footage will normally save you money on the maintenance front, particularly for big projects like siding or roof replacements.

Ultimately, letting your house fall into disrepair hurts you in the short term and long run. Ignoring an issue because you can’t afford to fix it means you may experience additional damage. For example, neglecting a leaky roof leads to water damage in other parts of the structure. The more extensive the damage, the costlier the repairs will become.

Ideally, your maintenance expenses need to fit comfortably in your budget. If they don’t, then it might be time to move.

3. You Don’t Need the Space

One reason “empty nesters” typically downsize is they don’t need the same amount of space to live comfortably. Once children move out, you can end up with several unused rooms or find that your shared living areas are bigger than you require.

Aside from the issue of keeping a large home clean, the additional space also adds to your monthly utility expenses. Heating or cooling rooms that aren’t in use adds up, so you save on those expenses when you downsize. Plus, you won’t have to sweep, dust, or vacuum those areas, saving you time too.

Now, this doesn’t mean you can’t maintain a guest room for visitors if it will really see some use. Downsizing doesn’t mean you have to have fewer rooms, just less square footage. Just consider how much space you need according to your lifestyle and see whether making due with less is an option. Additionally, don’t ignore the ability to make a room serve more than one purpose — like an office that also works as a guest room.

4. Saving Has Become Impossible

Even if your housing expenses don’t exceed 35 percent of your income if you can’t afford to save for retirement or your other goals, then downsizing may be a solution.

Having emergency and retirement savings helps secure your financial future. Without money in an emergency fund, a single unexpected expense can derail your household.

By moving to a smaller home, it may be easier to save and pay down other debts. This means you can craft a better financial future for yourself, ensuring you can manage the unexpected and achieve all of your goals.

5. You Want Better Features and Finishes

While many of the reasons for downsizing are financial, there are qualitative issues worth examining. For instance, if you choose a house with less square footage that has the same value of your current home, you may gain access to nicer features and finishes.

For example, you might be able to afford a better neighborhood with improved amenities. Maybe you can find a home with more land or an upgraded kitchen or bathrooms.

Choosing a smaller home may mean you can afford additional creature comforts, so don’t neglect this possibility if you are open to downsizing.

6. You’re Going to Be Traveling

Many people want to spend their retirement traveling. If that applies to you, then downsizing can be a great option —  you won’t be spending much time at home anyway.

Usually, when you buy a smaller home, your costs go down. Not only can this free up more money for traveling, but it can also make maintaining the house easier when you are home.

In fact, choosing a “maintenance-free” property, like a condo with an HOA, may make it even easier to travel. Just make sure you calculate the cost of any HOA fees into your budget and only select a property if it is genuinely affordable.

Time to Move to a Smaller Home

Any of the reasons above can indicate that moving to a smaller home is a smart choice for you. However, the decision is yours to make, so choose the path that lets you live your best life today and into the future.

Readers, have you or someone close to you ever downsized to a smaller home — or considered doing so? Tell us about your experience in the comments section beneath this post.

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About the author

Tamila McDonald

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