Downsizing in a seller’s market, is it for you? Edelman Berland conducted a study that showed 33% of homeowners thinking of selling their homes soon plan on downsizing to a smaller house. There are a lot of reasons why this could make sense to do now while the majority of the United States is experiencing a seller’s market.
Financial guru Dave Ramsey highlighted ,in one of his blogs, that there are many reasons why downsizing in a seller’s market to a smaller house could serve your needs better. Ramsey goes on to give three financial advantages in doing this:
- There is less space in a smaller house which means less time, stress and money spent on expenditures.
- You could have more of a savings to use for your retirement if you have a lower monthly mortgage payment.
- Using the revenue from the sale of your current home to pay cash for a smaller one saves you a monthly mortgage payment. If paying cash isn’t an option then aiming for a 15 year fixed rate with a 10-20% down payment can help to pay off the mortgage faster while saving money in the process.
Realtor.com suggests, in a downsizing in a seller’s market article, asking yourself important questions in deciding if downsizing in a seller’s market is right for you and your family. They give two main questions along with more helpful information.
Q: After I downsize, what kind of lifestyle do I want?
A: “For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.”
Comments: Some homeowners are splitting profits from their current sales of homes to put down payments on smaller homes or vacation and/or retirement homes where they plan to live.
Since interest rates and home prices are predicted to rise, locking in a mortgage rate today makes sense financially.
Q: Is there enough equity in my current home to make a profit?
A: “For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home.”
Comments: In a recent Fannie Mae study, only 37% of Americans think they have a significant amount of equity(>20%) in their home. Corelogic’s latest Equity Report reveals 78.9% have more than 20% equity. That equity could help build the life you have always wanted.
If you are debating downsizing your home and want to evaluate the options you currently have, let’s meet up to help guide you through the process.
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