If you are close to retirement or are already retired, downsizing to a smaller home could offer financial benefits that make things more comfortable in this exciting next phase of your life. Even if retirement is a bit farther into the future, downsizing while the market is hot can help you make major progress in financially preparing for retirement. Let’s take a look at the top three benefits of downsizing for those looking to retire in style.
1. Pay off debt – Cashing in on the positive equity in your home and downsizing to a smaller home can free up funds to pay off other kinds of debt you’ve been carrying. You can use your profit to pay off credit cards, vehicle loans, medical bills or even lingering college loan debt.
2. Buy your new home in cash – When you downsize to a less expensive home, the profit could be enough to buy your new, smaller home outright – in cash. Buying your next home in cash is a big benefit. You’ll avoid mortgage interest, private mortgage insurance (typically required for home purchases with less than 20% down payment) and in some areas you might even qualify for reductions on property taxes when your home is paid in full.
3. Super-size your retirement nest egg – Depending on your profit, downsizing to a smaller and less costly home can give you funds to super-size your retirement nest egg. When you are debt-free and have your emergency savings of three to six months of typical expenses built up, you can use the profits from your home sale to grow your 401K, IRA, general savings and stock market investments. Invested wisely, the funds provided by downsizing can make a big difference in the size of your retirement nest egg.
You don’t have to be retired already to take advantage of the financial benefits of downsizing. If you have significant positive equity and more space than you need, downsizing can give you a big financial boost that you can use to pay off lingering debt, buy your next home in cash and grow your retirement savings. Your RE/MAX agent, James Haas, can help you sell the home you have now and also help you find your new home. Downsizing doesn’t have to be complicated when you have a top-notch realtor to guide you through both parts of the process.