The Financial Upside of Downsizing

For years, downsizing has been common throughout the Canadian housing landscape. When homeowners see their children all grown up and leave the nest, they have little need to own a larger residential property. In addition, the amount of work and cost to maintain a single-family home can be quite challenging for older households. Of course, inflation and cost-of-living factors are also considered for those struggling to pay their bills or approaching retirement, as they can use the accrued equity to help cover all or some of their living expenses in their golden years.

As a result, they will list their home for sale and relocate to a smaller property, whether a bungalow or a condo suite. Indeed, choosing to downsize and reduce your living space can have several financial upsides and help mitigate financial concerns you might have residing in a much larger home.

Let’s take a look at several of the financial upsides of downsizing.

The Financial Upside of Downsizing

Here are eight financial upsides of downsizing:

 1. Lower Mortgage Payments

One of the most significant benefits of downsizing is the reduced costs associated with mortgage payments. A mortgage for a smaller property is typically much less than you are probably paying now, saving you on monthly payments. In some cases, you may even be able to purchase the smaller property in full since you will have sufficient cash flow from selling your existing home.

 2.  Reduced Taxes

How much are you currently paying in property taxes? A notable advantage of downsizing is lowering your annual tax bill. Remember, a home’s value for tax purposes is assessed on square footage. So, property taxes will be assessed at a lower rate for smaller properties, which can be a vital benefit of downsizing, especially considering that municipalities across Canada are raising their property tax rates to sizeable levels to cover budget shortfalls and keep up with inflation

 3Lower Utility Bills

From more lights to greater energy consumption, utility bills are generally higher for larger residential properties than for their smaller counterparts. Therefore, by downsizing your living arrangements, you are far more likely to save on heating and cooling costs. Moreover, your new home will likely produce lower water bills if you do not have a yard in the downsized property.

 4. Lower Insurance Costs

Many Canadians are taken aback by how much they spend on home insurance. While the premiums will vary, home insurance costs are typically lower for smaller homes than for larger properties, as insurance companies determine premiums based on the property sizes.

 5. Reduced Maintenance Costs

Let’s be honest: Bigger homes require more maintenance. If you move to a condominium or a senior living community, maintenance costs are usually covered in your monthly payments and may be lower than that of a larger property. You also do not have to worry about snow removal or maintaining your yard or garden, as the condominium management takes care of these things.

Whether you need a roof repaired or the lawn mowed, maintenance costs add up—both financially and physically!

 6. Amenities and Membership Costs

The amenities are another upside of downsizing if you move to a condominium or senior living community. Most of these places provide their residents with several amenities, such as a fitness centre, swimming pool, clubhouse, sun deck, and tennis courts. In addition, depending on the location, there might be additional community activities.

Overall, these amenities can help you save on gym, pool, or club memberships.

 7. Car Payments and Savings

Downsizing is a terrific opportunity to relocate to a community with better public transportation or a location that gives you walkable access to most necessities. This can help you save on fuel costs and may even enable you to give up your car altogether. Altogether, saving additional money on car payments, insurance payments, and car maintenance and repairs can add to your pocketbook.

 8. The Joy of Decluttering

Let’s face it: A bigger home will usually mean accumulating too much stuff. Downsizing will allow you to reduce clutter, depart with stuff you have never used in years, and get rid of your belongings. You can easily and quickly profit from selling furniture and other items you will no longer use in your smaller home.

Remember, as the KonMari Method tells us, the best way to declutter is to ask yourself, “Does this bring me joy?”

Downsizing is Financially Advantageous

Overall, downsizing can be financially feasible depending on where you relocate and how much you can save. Statistics show that the primary reason for downsizing is to save money. Not only does the reduction in monthly expenses increase savings, but these savings could be re-invested or saved for retirement. The money you end up socking away every month can be utilized to reduce existing debt or pay off loans, which is another financial advantage.

Switching from a larger property to a smaller one can ultimately help you improve your financial situation and take away the stress you may have because of high monthly payments and debt. It can enable you to spend that money on something you would enjoy and ensure you are not constantly worried about paying your bills, which will likely be much higher for the larger property than the downsized one. Ultimately, you can experience many other positive benefits like a simpler lifestyle, fewer tasks, less clutter, less time spent on maintenance and cleaning, and more money and time on hand to simply enjoy your life doing other activities and living a more balanced life. Rather than focus on exorbitant mortgage payments or ballooning monthly bills, your new concentration will be family, health, and everything else you enjoy in life.

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