The kids will soon be off to college and out of your home. Should you run out and sell your house? It’s not a simple decision.
Factors that may encourage you to stay include:
- Do you want a place for your children and grandchildren to stay when they visit?
- Are you emotionally ready to leave?
Factors that may encourage you to downsize include:
- Do you need a smaller home because of financial reasons or other circumstances?
- Would you be better off if you saved money on your mortgage payments, or do you need the profits from selling your house to live on?
- Do you need to move to be close to a spouse who is in a nursing home?
- Can you and your spouse still climb the stairs every day to an upstairs bedroom?
Make sure it’s affordable
If you decide to downsize, make sure the place fits both your pocketbook and your lifestyle.
Ask a REALTOR® how much he or she will charge to sell your house. Then determine how much you will end up with from the sale. Under current tax rules, up to $500,000 (if you are married and file jointly) in profits from the sale of your principal residence are not taxable as long as you’ve lived there for at least two of the previous five years. Up to $250,000 in profits are not taxable if you’re single. Consult a tax advisor to discuss your situation.
Look into how much it would cost to move and to maintain a smaller home. Make sure it really is cheaper to live there.
Decide to downsize only once you’re satisfied that the finances make sense.
Buy into your new lifestyle
A smaller house in your current neighborhood could be the right decision if your priority is maintaining close ties to neighbors. Just make sure there are amenities like public transportation and stores nearby if your health begins to deteriorate.
A condominium or a unit in a retirement community could be perfect if you never want to mow again, or if you want to focus on travel, hobbies and perfecting your golf stroke in the company of other seniors. Just remember you’ll have to pay maintenance fees for the upkeep of the common areas. Talk to current residents to see whether they’re happy with the way things are run. Also investigate the rules. If the association forbids pets and you’re a devoted dog-owner, be prepared to move on.
You may prefer to purchase a duplex or something similar. Renting one of the units will bring in extra income, and you’ll have built-in neighbors.
If you’re adventurous, you may even opt to move to another state or country. Make sure to visit first, get your paperwork in order and anticipate seeing less of the people you leave behind.
Finally, be prepared to sell or give away furniture and other possessions. You’ll have less space for everything after downsizing.