Downsizing is a great way to save some money and improve your finances during retirement. If you actually look at your numbers, is it really going to save you money? After moving costs, taxes, closing costs, etc., it’s still going to be expensive.
Here are a few things that you should think about before downsizing and buying a new house during retirement.
- Will the mortgage payment hurt your budget? Most retirees are already on a tight budget during retirement. To accommodate this with the new house payment, you’ll most likely have to get a 30-year mortgage. With a 30-year mortgage, you’ll have lower payments, but you’ll still be stuck with monthly payments well into your retirement.
- Owning a home can be more expensive than renting. In the middle of the summer when your air conditioner breaks, that’s out of pocket money that will cost you. If you can’t afford spending a lot of money on repairs, it might be a better option to rent. That way, your landlord will take care of those things for you.
- Weigh the pros and cons of different mortgage terms. Like mentioned above, it’s more than likely that you will opt for a 30-year mortgage to have lower monthly payments. But if you can afford a 10 or 15-year mortgage payment each month, you could end up saving yourself some money.
- Should you rent? While renting does cost you a predetermined amount of money each month, you won’t have to pay for repairs. Renting can also save you money on maintenance, such as mowing, weed eating, etc. You also wouldn’t have to pay property tax or have homeowner’s insurance.