Thinking about downsizing your home? How do you know if and when you should start? In this episode, we discuss why would you want to downsize your home, how to start and when is the best time. We also explore if you should downsize your home to pay off debt and the impact of downsizing with your home equity.
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What we discussed:
Hi everyone. I'm Karl. Welcome to another Homebuyer's School video, a channel where you get the latest strategies, tactics and tips from home buying experts and remember if this is your first time on this channel and you want to get the latest strategies from the experts, hit the subscription button below, hit the little notification bell so you don't miss anything.
So today I'm joined by Kevin French, Realtor with RE/MAX, and the question we're going to answer, actually the topic we're going to talk about today is downsizing your home.
So, Kevin, why would somebody, first of all,
Why would somebody want to downsize their home?
Usually it's older people that are empty nesters and their property was built for their entire family and now the family has moved, the children have moved out and they have too much space.
Other than that it would be younger people that have too much space, they've bought something they'd need and now it's just a lot of square footage that's not being used.
Are you finding a lot more of that? Not the empty nesters, but more younger people thinking, "Oh, I have way too much space."
More than you would probably think.
A lot of people assume that all downsizers are empty nesters and that they want to get rid of the home they've lived in for 30 years and then buy a townhouse or smaller bungalow or something like that but there are a lot of people who are shopping now and understanding this isn't what I need, this is more than I need.
So why am I buying that? So it might give them the opportunity to spend the same amount and just get a nicer property or a property that's located in a different neighborhood that's a little more expensive but a smaller property then they were originally shopping for.
How to start the process of downsizing my home
And if I wanted to downsize my home, regardless of the reasons, how do I go about starting that? Do I just start finding a home that's much smaller than the one I have now in the same neighborhood?
You probably, it depends on the demographic and what you're looking for.
Let's use empty nesters for an example, a lot of them are going south in the winter so they're looking for something that is lock and leave.
They want a townhouse or an apartment-style condo so that they have the ability to have all their, the exterior of the property taken care of and there's a little more safety in owning a property where there's so many attached neighbors so, therefore, they can leave the property for months on end and then pay the bare minimum in terms of utilities and then that's what they're typically looking for.
If you go onto the other side where it's younger people that don't want as much space as they've once had, they're looking for just a smaller property within the community they already live in or even a community they wanted to live in more than that.
Downsizing to pay off debt?
And should I actually downsize my home to pay off some debts?
Let's say I'm heavily in debt. Should I actually go out and doing that regardless if I'm an empty nester or a very younger person?
Yes. I would say yes for sure.
If you have no need for 600 square feet of your 2,000 square foot home, why live in a 2,000 square foot home?
If you can reduce your monthly output and then use some of the equity that's gained in your current property to pay off debt, which I have lots of clients that have done that, moved into a 1,200 square foot townhouse from a 2,000 square foot home, so a detached home that might be $500,000, now they're into a townhouse that's $350,000, take any equity that you have, distribute it as necessary and then live with smaller monthly payments.
Home equity and downsizing
But wouldn't, so like devil's advocate on that, wouldn't be say you could downsize but wouldn't the equity that you're building with a bigger home over the long term offset the payments they'd have when downsizing?
Kevin French: The equity would offset the payments?
So like, you know, the equity that you've gained from a larger home, if you downsize, obviously you get less equity from that house right?
You'd get less equity but it's not about, for those sellers or buyers, whichever end we're looking at it, their goal isn't to think about in 25 years from now what am I going to get out of my property.
Instead, they're taking on a smaller mortgage that they can presumably pay off sooner and then have a lifestyle that they're, they don't want to wait for that lifestyle 15 or 20 years down the road.
They want to capture on the lifestyle now and stop living in excess.
Essentially, it's not over the top, they just have space that they don't need and that they don't use on a daily basis so why bother paying for it. You're just paying heat, you're paying taxes on that, and you're paying a mortgage on things that you never utilize.
Best time to start downsizing
So let's say you are ready to downsize or you thought about, "Hey, you know what? I have too much space," or "I need to downsize." When's the best time to do it?
Do you just, "Hey now let's just start," as quick as you can, or do you just wait, similar like you buy another house?
Now is the time to do it particularly for the empty nesters because, and I'm not saying that they need to sell their homes tomorrow, they should.
I'm saying now because to start the process in my experience, empty nesters take about three years to move.
So they think about it. They talk about it. They discuss it with their family and then it's a very long process of what they want to do next.
A part of it for some people is denial, that they don't need to, they can take care of a 3,000 square foot home, they can take care of the lawn maintenance and the snow shoveling and it's not that they can't, even when they do so.
It's all about lifestyle choice. If you want to live maintenance free living where you don't have to shovel and you don't have to mow lawns and you don't have to worry about home maintenance on your older property.
I would suggest that they start doing the process now because it usually takes more time than they think and then they've usually accumulated in the time that they've lived in the home which they need to downsize.
Karl Yeh: Okay. Anything else to add in terms of downsizing?
Kevin French: No.
Question of the day
No? Perfect. And so the question of the day I have for you is:
Have you actually downsized from your current house or thinking about downsizing and why did you do it? Or why are you thinking of doing it?
Let us know in the comment section below.
And if you want to learn more about home buying and the home buying process check out our videos here and make sure to hit the subscription button below with the little notification bell so you can keep learning from the experts.
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About Kevin French:
Kevin French is a Calgary and area based realtor with a client focus. He specializes in a stress free home selling process that is built on customer service. Understanding that your home is one of your largest investments, Kevin employs a marketing mix that ensures you will maximize returns on your home sale. Diligent market research coupled with an in-depth understanding of the Calgary and area markets, allows Kevin to pinpoint the perfect price for your home.
In addition to perfect pricing, Kevin offers a suite of additional services such as professional photography and an interior designer to ensure your home shows its best. Kevin French has become a trusted name in real estate because he is results driven and works closely with his clients to produce the best results.