Whether you’re nearing retirement age and starting to plan out how to live comfortably after you stop working, or you’re just tired of being house-poor and want a cheaper way to live, the idea of down-sizing your home might be appealing.

Benefits of Down-sizing Include:

  • Smaller mortgage – Nothing frees up cash-flow easier than cutting a huge chunk out of your mortgage payments.  Selling your $500,000 home and moving into a smaller one that costs $200,000 will leave you with either a much smaller payment or no payment at all if you have enough equity to pay it off completely.
  • Cheaper taxes and bills – A smaller property should also mean lower property taxes and less spent on utilities.
  • Less space means less stuff – Most of us fill up whatever space we have available.  If you’ve lived in a 3,000 square foot house for the last 20 years, it’s probably filled to the brim with acquired knick-knacks, furniture, kitchenware, and the remains of long-forgotten hobbies.  Down-sizing will force you to reassess all of your possessions and decide what you actually want and what you’ve only been keeping out of habit.
  • Easier to maintain – Fewer, smaller rooms means less dusting and cleaning, and generally less to think about. 

Well that all sounds great.  Lower bills, less clutter, less stress.  But is it really worth it?

Depending on your situation, you may really not realize as many of the benefits as you were hoping for.

  • Cost of moving – Between realtor fees, closing costs, taxes, and moving fees, you could be paying over a year’s worth of mortgage payments just to make the move. 
  • How much are you really saving on taxes and bills? – Most of your utility bills are delivery charges, debt retirement charges, and the like.  Very little of it is the actual amount of electricity or water you’ve used.  Sure a smaller home will use a bit less heat and electricity, but you’re still using the same amount of water, and in the end the difference probably won’t be worth the cost.  Taxes may also be a bit lower, but if you’re living in the same area as before the difference is also probably pretty minimal.
  • Less clutter or just less space? – Downsizing your stuff sounds great, but you probably found that when you finally got moved in your house was just as full as before.  Then you had to buy some new furniture to fit the new room sizes, and you’re quickly back to where you started.  Sure there’s less stuff, but your house is just as full.
  • How much easier is it to maintain? – You’ve got less rooms, and the ones you have are a bit smaller.  We’re really only talking about minutes worth of some quick sweeping and dusting.  You might even be MORE stressed at the lack of options for things like space for a desk or other specific-use area.

 

The last point to mention is that a smaller home is not necessarily cheaper.  If you’ve lived in your home for 30 years and haven’t done much in the way of modernizing, buying a smaller, recently upgraded home is probably not even an option.  Your home will sell for much less than your neighbour’s because it doesn’t have stainless steel appliances and a granite countertop, which further reduces your advantages to downsizing.

Every situation is unique, and in some cases downsizing truly can improve your lifestyle, lessen stress, and free up some much-needed cash-flow, but that’s in no way a guarantee and you should really run the numbers and think about all the points listed above when making your decision.