Why people downsize
For many retirees, a big house becomes more work than it's worth. Fewer rooms can mean lower utility bills, less cleaning and fewer repairs. Downsizing can also free up equity you built over decades, which you might use to add to savings, pay off debt or simply have a cushion.
It's also a lifestyle choice. Some people want to be closer to family, a single-level home or a walkable neighborhood.
Decide where you'll live next
Start with the life you want, then find the home that fits. Think about stairs, distance to health care, the cost of living and how often you want to travel.
You might buy a smaller home, a condo or a townhome, or you might rent for a while. Each has trade-offs. Buying keeps you building equity. Renting gives flexibility and fewer maintenance tasks.
Steps to plan the move
- Get an estimate of your home's value and what you'd net after selling costs
- Set a budget for your next home, including taxes, insurance and any HOA dues
- Start decluttering early: sort, donate, sell and give to family
- Talk with a tax professional about your gain and any retirement-income effects
- Decide on the order: sell first, buy first or both at once
Taxes and costs to plan for
If you've owned and lived in your home for at least two of the last five years, the federal home sale exclusion may let you exclude a large part of your gain from income. Larger gains may still be taxed, and state rules vary. Talk with a tax professional before you list.
Don't forget selling costs, moving costs and any repairs. A smaller home can still come with closing costs, new furniture and a period of overlap.
Timing the sale and the purchase
Selling first gives you a clear budget and no risk of two mortgages, but you may need a short-term place to stay. Buying first lets you move once, but it can mean carrying two homes for a while. A home-sale contingency on your purchase can help, though it can make your offer less competitive.
Your agent and loan consultant can help you weigh the options for your situation.
Financing your next home
Retirement income, such as Social Security, a pension or retirement account withdrawals, can count toward qualifying for a mortgage when it's documented. CapCenter mortgages come with ZERO Closing Costs (restrictions apply). If you buy with CapCenter Realty, the Realty Purchase Credit can give you up to 0.5% of the purchase price, where we offer realty services (see Offer details).
