Downsizing seems to be the hot topic at our house lately. My husband and I had a long discussion last week. It revolved around finances, lifestyle, goals and happiness. Since I quit my job 5 months ago, I’ve never been happier!
I took interest in the CNN story about a couple selling their home to keep their small businesses alive. Essentially, the family is selling their lakefront home and buying a smaller one which will cut their mortgage in half.
We wouldn’t be downsizing to make ends meet, but we would be doing it to save money, just like all my other money saving tactics. Although, this would save a whole lot more than switching to Vonage or playing the Grocery Game!
We live in a house that we custom built 3 years ago, complete with unnecessary amenities, like our beloved sauna, imported granite, and more square feet than we know what to do with.
We love our house, but I try to remind myself that a house doesn’t make the home, the family does. Since we built our house, I probably feel some additional emotional attachment that doesn’t really factor in financially.
We also live in a premier neighborhood and pay a premium for that. After discussions with a friend, we found that a similar size house in the next town over goes for about $250,000 less. We probably wouldn’t be willing to move to the next town, but we would consider the next neighborhood, where similar sized houses run about $100,000 less.
Downsizing Feels Good
I made a similar downgrade last year when I sold my Mercedes for a Mazda minivan. And to be perfectly honest, I haven’t even missed it. The car was half the price, but does the same task. It’s making us think… what if we bought a house that was half the price?
And ironically, without participating in the corporate rat race on a daily basis, I feel like I’ve also distanced myself from some of the need to drive a fancy car and live in a huge house.
When looking at housing costs, it’s easy to just look at the mortgage. However there are many other costs that would probably go down as a result of a smaller house. And to come up with a complete financial picture, you have to consider all the costs involved.
- Mortgage Payment – Principal and Interest
- Real Estate Taxes
- Homeowners Insurance
- Umbrella Insurance
- Gas and Electric
- Homeowners Association Dues
- Landscaping and Maintenance
Are you considering doing the same? Here are some handy resources for home buyers right now.
Valuation. Our house finally listed on Zillow. It’s a easy way to check out approximate house values.
Mortgage Rates. You can get a free quote fromto see rates for a refinance or a purchase.
First Time Home Buyer Tax Credits. If you are in the market as a first time home buyer, the $8,000 First Time Home Buyer Tax Credit will be a nice bonus. (Or the $7,500 First Time Home Buyer Tax Credit for 2008.)
Homeowner Affordability and Stability Plan. Rules to take advantage of this part of the economic stimulus plan will be unveiled March 4. I’m anxiously waiting to hear all the details.
Low Mortgage Rates
We’re in a great situation, where we cash flow more than we used to when I had a job; but banks just don’t quite see it that way! Since I don’t officially have an income (banks want at least 2 years of self employment income), and I doubt that any bank around would be willing to include the withdrawals I make from my retirement as true income, I’ve been sitting on the sidelines watching people refinance with great rates.
I’m jealous. It’s hard for me to not take advantage of such historic lows! Although, if we bought a smaller house, I could just have Scott apply by himself to take advantage of a great rate. I know, I know…. not at all a reason to move, but it is something that factors in financially.
There are many factors that weigh into our thoughts: school system, eventual family size, proximity to both of our families, and many more. We love our house and our neighborhood, but we’re trying to decide if it’s really worth the premium we pay to live here. Would we be just as happy in a smaller house?
At this point, we’re still in the very early stages of discussion. We have more questions for ourselves than answers.
Have you downsized your house? Tell me about it! I’d love to hear your thoughts…