Bigger doesn’t always mean better, especially when it comes to the maintenance of a home. In fact, most families are able to afford smaller dwellings without having to change their lifestyles tremendously. One stressor that pops up, however, when families begin to think about downsizing, is where they will put all their belongings. This major roadblock to downsizing can be addressed through creating an opportunity to sort through everything and get rid of things that haven’t been used or touched for years.
There are many options for homeowners to ensure their items find new homes. Items can be sold in yard or garage sales, in the newspaper, on an online classified website like Craigslist, or through eBay. With such a wide range of options, there is no excuse to continue to hang on to everything in the house, especially those items that are never touched or used.
Downsizing is an opportunity for homeowners to weed through their hoarded items and clear them out of the home, however, it also allows them to reallocate their money from paying the mortgage to other financial goals. Being able to reallocate money to other needs opens more doors for homeowners and provides them with more options.
Paying Down Loan Debt
Rather than spending money on a large mortgage, downsizing to a smaller house and using the saved money to pay down debt can feel liberating. The reallocated money can be used to pay off car loans, student loans, or other accumulated loans in the family’s financial portfolio. In the long run, the family is ultimately paying less interest for these different loans, which saves them a tremendous amount of money. Extra payments made to these loans can result in owning the items outright and eliminating monthly expenses over time.
In addition to paying down loan debts, money saved from downsizing a home could be used to pay down credit card debt as well. This means the homeowner can eliminate high interest rates. These monthly payments can be a pain to deal with on a continual basis. The extra cash can help decrease stress and reduce the amount of monthly expenses.
Paying Down The Mortgage
A smaller home results in lower mortgage payments. One thing to do with the savings from downsizing can be to pay off the new mortgage sooner. The long-term benefit from doing this is the family will own the house outright sooner than expected. Without a monthly mortgage looming overhead every single month, the family can pay off the home and live mortgage-free for the rest of their time in the home. To find out how much can actually be saved per month, it is best to contact a real estate company, like Taylors offices, to find out what the interest differences would be between large and small mortgages.
Saving Up For Retirement
Downsizing to a smaller home would also give homeowners opportunities to save their money for retirement. It is recommended that up to 15% of monthly income be saved for retirement use. Some ways homeowners can invest are through deferred-tax retirement plans and other programs. There are many different pension options available to those retiring in the United Kingdom. Specifically, there are private pension schemes and state pension from the government.
Saving up for retirement is a good idea especially if you are living debt-free without loan payments and mortgages, and you are reaching certain milestone ages in life. Depending on the stage of life, different considerations become more important than others. There are many resources that can help people plan ahead and think about their futures. Younger homeowners may not have the luxury to save up for retirement yet, but it is never too soon to start thinking about how to fund retirement.
Is Downsizing Right For You?
Downsizing may not be the right solution at the current moment for everyone wanting to simplify their lives. It does, however, remain one of the top solutions to saving money and paying off debt. Decisions may hinge on how much mortgages are in the neighborhood, what stage in life the homeowners are in, and what they are able to afford at the moment. Whether or not it is the right time to downsize or the right thing to do in the process, it is definitely something worth considering.
Zak Allen now works as a life coach and likes to offer his thoughts on subjects like downsizing to an online audience. He writes for a number of lifestyle websites on a regular basis.