Now that your children have grown and you're starting to find yourself more alone in the house, maybe you're thinking of downsizing. Or maybe you want to get serious about your retirement plans that's why you're looking for a retirement home. No matter what the reason is, downsizing is one of those important financial decisions that you have to think about many times over before making a decision.
Different people have different reasons for wanting to downsize. Whether you want to find a new home that fits your current needs or you just want a change in your lifestyle, here are 4 things you have to consider before finalizing your decision to downsize.
1. Change in lifestyle. What are your plans? How do you want to spend your retirement days? What kind of new lifestyle do you want? Whatever your plan for your retirement, it will definitely have a great impact on the direction to where your life is going. If you're planning to age in place, you'll have to make sure that the home is suitable for aging in place. Decide what you want to achieve first so you can narrow down your home search criteria.
2. Budget. Being a senior citizen usually means that you are on a fixed income. If you're planning to downsize, you can heft a tidy profit from selling your current home and moving to a smaller one. You also have to consider your other expenses when planning your budget. Think about your hospital bills, health and life insurance, medicine, home maintenance, travel, real estate planning etc. Having a firm grasp on your expenses lets you arrive at a sound financial decision.The rule of thumb is that you should not spend 30% of your monthly income on housing. It should be a lot lower when you're downsizing.
3. Equity. Have you built up enough equity on your current home to make a profit? If you've been holding on to that home for several years and you've paid your mortgage in time, then most probably you have a sizable equity enough to put a down payment for your next home. Unless you have many debts or unpaid loans, you'll have enough profit from the sale of your home to buy a new one.
4. Finding an affordable home. This depends on where you want to buy your next home. If you're in a fast-paced market, you will find it more difficult buying the home that you want. If you have the financial capability, you can buy your next home before selling your current one. This provides you with more control over finding the perfect property for you instead of being rushed to find whatever happens to be on the market.
Once you have considered these things, you will be more confident in your next move and you can create better and informed decisions. Once you've decided you want to downsize, contact a real estate agent to know what your current home is actually worth.
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