Is your house too big? Does it cost too much? Or, are you simply considering a life change? Making the decision to move to a smaller home is never easy. We wrestled with it recently and agonized over the choice. Eventually, creating a list of pros and cons of downsizing our home helped us make a decision.
We’ve made many financial changes to reverse lifestyle creep. We’re applying saving strategies to almost all aspects of our life. Yet, one expense is significantly slowing our progress to financial independence – our house.
We’ve discussed selling our home before, and always quickly landed on “no.” From the very beginning it was to be our “forever home.” We love where we live, we’ve invested in upgrades to bring it close to dream home status, and the space and layout work well for us.
Yet, our spring break road trip, and the hours of conversation it led to, caused us to seriously consider selling again. It wasn’t an easy decision. Our first step was to consider all the pros and cons of downsizing. Clearly laying those out helped us make a decision.
If you are considering downsizing for any reason, I urge you to do your own pros and cons. Here are ours as an example, and to help spark your thinking. Yours may be different but many of these apply to any downsizing decision.
Pros of Downsizing our Home
This one is obvious. We own too much house. Two of us with almost 3000 sq ft. We live in a high cost-of-living (HCOL) area, so even though we bought at the bottom of the market and put 20% down, the mortgage is large. Add in expensive taxes, cost of heating and cooling, and a high city water bill and the monthly costs to own our dream home are too high.
A smaller home, outside of the city limits, will cost significantly less to own and operate.
Cash out equity
We have a significant amount of equity tied up in our home. Almost 25% of our net worth is the equity in our primary home. This is the result of both mortgage paydown (additional money applied for the last several years) and appreciation of more than 50%.
Selling would free this money up for other uses.
If we choose to sell the house, we would choose to be mortgage free going forward. We like the idea of living mortgage free. Less debt, and more money applied to investments!
More options (Finances and Living Experience)
Obviously, being mortgage free with lower costs has significant financial implications. This would give us a number of options with the freed up capital and additional savings each month.
Selling our current house also frees us up to try a number of other living options. We have not yet decided WHERE to move. We could try houses in different parts of our region, buy a condo, or rent an apartment. We’ve even considered trying life on a floating home in the nearby river.
Easier to maintain
All houses take effort to maintain. One of the arguments for a rental is that one can simply have the landlord take care of maintenance issues. Our current home has several things that make it challenging to maintain and prone to exterior maintenance issues. It’s surrounded by tall trees, on a steep slope, and three levels. Even if we buy another home, it will have fewer things to maintain.
A smaller size means that simply keeping it clean will also be easier. TFI says, “I never want to move until I decide to vacuum.” Three floors and almost 3000 square feet means a lot of routine cleaning even though we aren’t generally messy people.
Cutting that in half (or more) sounds great.
Shorten FI timeline
This could have been the headline reason. It’s certainly the reason we seriously considered downsizing.
For us, due to #1 and #2 we believe that downsizing our home will cut our time to full financial independence by more than 3 years. Depending on the final sales price, it may even make us FI instantly.
Slow travel is part of our retirement plan. Our city does not allow short-term whole house rentals. Leaving a large house empty for long periods of time is both economically inefficient and a security risk.
More intentional with stuff
We are not minimalists. I’m close, but TFI accumulates. In our 20+ year relationship we started in an 800 sq ft apartment then moved to a 1200 sq ft apartment. Our first house was 2100 sq feet, and our current one is almost 3000. Each space we’ve lived in has filled up.
A smaller living space would require us both to declutter and eliminate “stuff” from our life and cause us to be more intentional in the future. We have both agreed that this is a benefit. This agreement was easy for me, and more challenging for TFI. But, it’s definitely a pro for both spending and quality of life.
We have lived in our current house for almost 8 years. They’ve been 8 of the happiest years of our life. But, anytime you spend that long in one place, you develop certain habits and routines. Each new place you live is an opportunity to build new habits and routines.
Previously, we have let work define those patterns. With this move, we’ll make our choices based on a post-work life. We’ll select a home that fits with our future vision and the life we want to build.
As we are considering this, we have no idea where we’ll live if we sell our house. Change is hard (it will show up under the CONS) but the flipside of that is it leads to adventure. We are both excited by the potential adventure of selling our large house and seeking a new home with all of the previous PROS factored in.
Cons of Downsizing Our Home
We Love Our Current Home
The decision would be easy if we had a large expensive home that we hated. Or if it was simply more than we could afford. I know these are true for some people. In that instance, we’d quickly and easily downsize.
Unfortunately, we love almost everything about this home. We can afford it because we bought at the bottom of the market. It has a great location, sits in a beautiful tree-filled setting, and is laid out well for us.
Why would we give that up?
Never get back to neighborhood
As I’ve mentioned several times, we bought this home at the bottom of the local market in 2011. It has appreciated significantly. While there will be housing price dips in the future, I believe our metro area will continue to appreciate more quickly than the national average for the foreseeable future.
If we move, we will be priced out of buying back into the city and neighborhood we love.
I mentioned less stuff as a PRO of moving into a smaller space. It is. However, we already have lots of stuff and TFI attaches emotion to things. She also likes to be “prepared” by having almost anything we need available on short notice.
It will be a real cost to have limited space for things.
In the long term, this will be a massive financial win. In the short term, it will cause a dip in our net worth. There will be transaction costs including:
- Cost to prepare the house for sale
- Commission and closing costs from selling our large house
- Closing costs or rental deposits for our new home
- Moving costs
People often forget these things when discussing housing values. Changing your living situation has significant transaction costs.
We’ve lived in this house for 8 great years. Our lives have changed significantly all for the better. We have thousands of positive memories in this house. We also spent 6 years and then lost two beloved pets in the house.
Sentimental attachment is real. It’s always hard to move and leave memories behind.
We currently have the “cool” house among our peer group. People are also impressed when we share the neighborhood where we live. Our family loves to visit and stay. Virtually everyone comments on how much they love our house.
We will be giving all that up. A smaller place will not be perceived in the same way. We will likely live in a less trendy neighborhood. It is important to factor identity changes like this into decisions – they are often unconsidered or unplanned.
Related and interesting to note – when we mention that we are considering downsizing the most common reaction is to assume we are in financial trouble.
Harder to host guests
When friends or family visit, we always have room to host. We can host multiple couples and sets of kids. Entertaining, while relatively infrequent these days, is easy in our current home.
A smaller home will limit our hosting options both for short-term entertaining and longer term visits.
Moving sucks. Packing, cleaning, hauling, unpacking. It’s costly and a hassle no matter how you do it. If we don’t downsize, we don’t have to go through it.
Change of any type can be challenging. While I’m generally invigorated by change, TFI can struggle with it.
A significant change like this WILL have an impact on us and introduces the unknown. This is something to factor into any decision to sell. Much like sentiment and identity change it is hard to quantify this downside, but very important to consider.
There you have it – our list of pros and cons to downsizing a home. As you read through did you have an idea of where we landed?
While it wasn’t easy, we landed definitively on moving ahead with downsizing. The financial advantages, opportunity to design our future life, and adventure overcame the emotional resistance to remain. And, I have to give some credit to my heavy Bias for Action.
After the decision was made, we had to do the actual work!
For the steps we took to make it happen, read the other posts in the series:
- How We Were Able to Sell our House FAST
- How To Find the Right Smaller Home
- Unexpected Benefits of Downsizing Your House to Save Money
- 2020 Downsizing update: We are moving back into our rental property!
Have you downsized your home before? Are you considering it now? What does your list of pros and cons look like?