There are many reasons someone might want to downsize when buying a new home. Maybe the kids have moved out and you just don’t need as much space. Maybe you want more free time and less yard and home maintenance to worry about. Maybe you’re looking for a smaller mortgage and fewer home-related expenses. If your number one reason for downsizing is to save money, tread carefully. Buying a smaller home doesn’t always mean you’ll have fewer expenses. Let’s take a look at some of the factors that could make your downsizing attempt pricier than you expect.
Before you shed your suburban skin and rid yourself of that large house to move to a smaller place in the city, do a little research on property taxes. Sure, you might be able to snag a one-bedroom that’s close to everything for a smaller price than your house in the suburbs. But you could still be looking at a larger payment thanks to higher property tax rates. Make sure those property taxes don’t cancel out any savings you gained on the sale price.
A smaller home doesn’t always necessarily come with a smaller insurance premium. Think about the location you’re moving to and what’s required in the way of insurance. Before you make an offer on a home, check to see if you’ll be required to purchase flood insurance, which can be even more costly than regular homeowner’s insurance depending on your location.
If you lived in a more rural or exurban area prior to downsizing, you might not be used to paying homeowners association or regime fees. Condos, apartments, and retirement communities are popular choices for downsizing, and they usually come with HOA and/or regime fees that can be pretty hefty at times. Granted, sometimes these fees include things like exterior insurance, trash pickup, certain amenities, and some utilities. But if you’re not used to paying a monthly fee such as this, you’ll need to really look at your budget to see if you can afford it.
New Home Features
Even if you’re moving into a smaller house, if it’s brand new, it probably has a lot more trendy features than your old house did. New building materials and energy-efficient features and appliances can cost a pretty penny, which pushes up the total cost of your home. When you move into a brand new home, you also have to take into consideration the amount of “stuff” you’ll have to buy to get set up. New home buyers often forget to include things like window treatments, rugs, and other decor in their budget.
Don’t forget that you might actually have to spend a good bit to get your old home sold before you can move. Sometimes you don’t realize how much updating a home needs until you go to sell it. If you’re home’s on the older side, you’ll at least need to repaint, make those repairs you’ve been neglecting, and perhaps even switch out carpeting. A few other things will likely show up on the inspection report as well. And don’t forget about the cost of actually moving! If you’re not DIY-ing your move with your own vehicle, you’ll need to pay movers or rent a moving truck. There’s also the cost of packing supplies, the time and effort you have to put into the job, the possibility of renting a storage unit, etc.
Downsizing can be a pretty great feeling, but it might not feel so great to your wallet if you aren’t careful. If your end goal is to save money by downsizing, just be sure to take these factors into consideration before you make a move.