Are you considering buying a new downsized home? People downsize for a variety of reasons. Perhaps they are moving into an area where homes are more expensive. They may be new empty-nesters and recognize their home has outgrown them. They may even be approaching retirement age and don’t want the hassles of maintaining a large home.
The American Enterprise Institute says that homes in the United States are on average, about 1,000 feet larger than they were in 1973. They further state that living space for Americans, on a per-person basis, has doubled over the last four decades. Many of us have simply just realized we don’t need all this space. Many are choosing a smaller, simpler lifestyle. A downsized home can take less effort to maintain. Smaller homes also can have a massive impact on your monthly budget. Here are 5 ways downsizing saves you money.
Reduce or Eliminate a Mortgage
Average monthly mortgage payments vary widely across the country depending on where one lives. According to the National Association of Realtors (NAR) mortgage payments range from a low of $655 per month in Mississippi to $3,234 in Hawaii. Across the nation, mortgage payments average $1,061 per month. These payments are a significant part of a family’s budget. It also means that one of the most significant ways downsizing can save you money is by reducing or eliminating your mortgage. When moving from a larger home to a smaller one, there may be enough equity to purchase the smaller home outright. If downsizing doesn’t result in being mortgage-free, it can lead to lower payments or a significantly shorter pay-off period. This is money that can be used to pay off other bills, like high interest credit cards. That may also be money that can be invested elsewhere, compounding the significance of the savings.
According to the U.S. Census Bureau, about 64% of Americans are living in a home they own or are buying. Of those, however, less than 30% do not have a mortgage. Downsizing gives homeowners the opportunity to join that minority and free up funds for other purposes.
Utilities
Again, depending on where you live, electric and utility rates range significantly. The National Association of Home Builders says New Mexico has the lowest average electric bill at just over $76.00 per month. In Hawaii, that rate averages over $190.00 monthly. Add in natural or propane gas, sewer, trash and water payments and the costs for utilities add up quickly. While downsizing may not help with some utility costs, it should result in a significant reduction in heating and cooling costs. If you downsize to an area of the country with more moderate temperatures, that too can help reduce utility costs. There are other ways to save on utilities like improving insulation and using energy efficient appliances. Lower utility bills is a pleasant financial benefit of downsizing.
Property Taxes
The average household in America pays $2,089 per year on property taxes. Of course, downsizing can lower those property taxes if you are moving to a less expensive home. Property taxes can also be lowered by moving to a state with a property tax rate lower than where you currently live. Surprisingly, Hawaii has the lowest property tax rate in the country. It is follow with the low property tax states of Alabama, Louisiana, Delaware and South Carolina. The states with the highest property taxes are Texas, Wisconsin, New Hampshire, Illinois and New Jersey. You’ll want to keep in mind however, that property taxes are not the only taxes affected by what state you live. There are 27 states that charge property tax on vehicles and some states like Florida, don’t have a state income tax. Before planning a move to save on property taxes, perform your due diligence to make sure you won’t end up spending it on other taxes in the state.
Furniture
One unexpected benefit of downsizing is the need for less furniture. This gives you the flexibility to replace your existing furniture instead of moving it. This can save you significantly in moving costs and effort, especially if your downsized move is a long-distance one. You can sell your current furniture to help defray the costs of buying new. There are plenty of other tips to save when trying to refurnish a home. You can even make downsizing easier by purchasing a furnished property or condominium.
Maintenance
All things considered, a smaller home should result in less maintenance and maintenance costs. This will range from painting to roofing to HVAC maintenance. Many who downsize see lower maintenance as a big benefit, especially as they get older. It may not be a financial benefit, however, if you are moving to where a homeowners association takes fees to care for landscaping, exterior maintenance and other duties. If you are downsizing to a community with an HOA, make sure you understand the exact fees and what they encompass. You can then make a decision if it makes sense for you or not. You should also determine if there are some maintenance duties you enjoy like gardening or even mowing the lawn. There are certainly financial benefits to downsizing, but you also don’t want to eliminate the tasks you enjoy.
Even if there are no other factors, cost savings can be a very viable reason to downsize on its own. It doesn’t even have to be a dramatic downsize like you may have seen on social media to be effective. Contact a Movoto agent and start on your path to more cost-effective living.
2 Point Highlight
Across the nation, mortgage payments average $1,061 per month and are a significant part of a family’s budget.
Many who downsize see lower maintenance as a big benefit, especially as they get older.
