Should We Downsize?

Posted by Madison on February 26, 2009

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!

Our House

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.

Housing Costs

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

Housing Resources

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 from to 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.

Other Considerations

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…

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Comments to Should We Downsize?

  1. Two things. First, it’s not all about the money. If you really like your current house/neighborhood, then it may well be worth the extra cost. Second, I’m not sure how the market is in your area, but something to consider is that more expensive houses may have fallen (pricewise) further than lesser houses, meaning that your gain would be smaller than you might otherwise realize.


  2. You may have more house than you know what to do with now, but what about when your children get older or as you naturally accumulate more goods through the years.

    What about moving? Moving is a huge pain. As is putting your home on the market & closing.

    What about future appreciation? You know as well as anyone if both places appreciate at the same rate, the bigger place now will be worth far more in the future.

    I’d be more inclinded to jump on the downsize bandwagon if the home you wanted to sell now was more of an investment, but it’s your primary home.

    Just some things to think about (but you’re pretty thorough so I’m sure you have).


  3. @ Nickel and Howard: These are really helpful points. And it helps to hear what others think to remind me of our priorities. Great reminder, Nickel, that it’s not always about the money.

    Howard, the appreciation point is a good one I wasn’t thinking about. Our town and neighborhood are holding up better than any of the markets around, and they will probably continue to do so because of the schools, the university, and the demographics.


  4. I would try to refinance your current house. Check several lenders – I’m sure you can find one who would count your income. I also have less than 2 yrs of self-employement and each lender reacted to that differently (from straight no to it not being an issue.)


  5. I would love to consider downsizing but in my area, the homes are selling for far less than I would like … if they’re selling at all. In the last quarter, only one existing home in my price range was sold and it was on the market for 9 months. Only 3 new homes sold in that same price range.

    The real question is, what could you get for it if you did put it up for sale and how long would it sit there?


  6. For all the reasons you listed we are so glad that we downsized from the beginning. We were approved for $400K but ended up with a great little place for $160K. Now the only reason for us to move will be to change school districts. But our property taxes are lower and our energy bills are fabulously low. Plus no stairs to carry laundry or groceries up and down!

    Golfing Girl

  7. We recently upsized (rental condo to first house), but we did so with many of the same considerations. Our outlook was we’d be there for 7-10 years and bought a house to accommodate our future plans (namely kids). Our house for current family size is a little crazy but will balance in a year or so.

    If downsizing is right for your family it’s great. One more thing to consider are the schools the next neighborhood over the same (or as good as) as your current schools?

    sara l

  8. You can still apply along with your husband. My DH is a stay at home dad (and when we bought the house, we didn’t quite have the kids yet, so he was “just” a homemaker). We applied as a couple, with one income. It wasn’t a problem at all.


  9. We are currently asking ourselves some similar questions. We own a home, but purchased a lot last November with the intention of building a house. We then found out we were expecting a baby, and with the uncertain economy – I’m now a little skittish about building. We could fairly comfortably live in our home for quite awhile.

    I am currently going through the decision-making process with my husband, who is being quite one-sided and wants to go through with the new home. I feel he’s not asking himself the right questions. Can we truly afford the new payment and the other incremental costs? What happens if we don’t sell our current home right away? And we haven’t even really tackled the costs and time commitment associated with the new baby or the fact that I don’t intend to return to work full-time.

    My thought is -besides the time we’ve invested in designing the home and picking out the fixtures, colors, etc., we’re not on the hook for anything – why not wait a year or two and see how things shake out?

    Any advice? Am I just being skittish for the sake of being skittish – or are these legitimate concerns?


  10. I don’t think it will be worth for you – buying a house for $100k less is not worth it – especially after all the fees/costs. You might be lowering the mortgage by $80k?

    You have another kid on the way – just keep ’em coming! That house will fill up in no time. 🙂

    Four Pillars

  11. We are in exactly the opposite problem. We are outgrowing our two bedroom house, and are trying to decide about upgrading. We decided to wait and here’s why:
    1.Mortgage is currently paid off, buying bigger would have a big impact on our cash flow
    2. Our location to work. Moving to a bigger house would mean buying another car, lunch at the office
    3. we love our neighbors/hood
    4. we finally have our house how we want it.
    5. a smaller house is cheaper to live in
    6. plus we don’t have to buy stuff to fill it up.

    But as our kids grow, having 3 (potentially 4) in one room may over rule all of those facts.


  12. This reminds me of when my bf and I were shopping for a new car. At 6’4 he’s pretty tall so he won’t fit into a small car any time soon. When I purchased my car I bought the smallest car that he could fit in with 2 inches of headroom. He’s not the most comfortable, but he fits.


  13. I had one retired friend who went house shopping with his wife. They were hoping to downsize, but they ended up with a house even bigger than the one they were living in. The prices were low and his wife fell in love with the house.

    A co-worker went house shopping with his wife, looking for a rental property. He ended up purchasing a house with 6 acres. He said the deal is too good to resist.

    And I just brought my first house a few weeks ago. Same thing. Had it in our heads to purchase a small house so that if one of us get laid off, we can still afford the house. We ended up with a huge house in a pricey neighbor that we would never have been able to afford a few years ago. Once you start shopping, I think it might be a little hard to resist some of the bargains on the market right now.

    Small Steps to Health

  14. Problem is, moving’s expensive. Not only do you need to figure in the costs of Realtor’s fees, closing costs, new mortgage fees, and physically getting your junk from point A to point B, experience suggests that there’s always a slew of expensive little surprises whenever you move into another house, many of which will not be covered by the semifraudulent homebuyer’s insurance. One friend figures 3 percent of the purchase price for repairs and upgrades in the first year. Consider how much you’d actually net after selling, moving, and fixing up the house to suit your family.

    That said…the same friend moved himself to a slightly smaller house in an area where taxes, insurance, and utilities are much lower, and he is very pleased. Says the smaller house is easier to keep clean, too. But: he moved from our somewhat marginal neighborhood to a solidly middle-class development with no nearby slums…in effect, he downsized himself UP, socioeconomically.

    Funny about Money

  15. I actually downsized a bit too. Virtually stopped eating out; No more Starbucks; Paid off my car and expect to use it for a few more years (its a Honda).

    I was lucky to have completely paid off my CC debt last year.


  16. We downsized a lot when we moved to SE Europe, and we didn’t sell our house — we are renting it out. It’s a challenge, but we are pursuing some family aspirations together, and it leads us closer. We will cherish the time that we are spending here, even living in an apartment that is much smaller than our house in the States. We also don’t have a car over here, so we don’t have gas, insurance, or other costs to worry about. That helps a lot.


  17. My family (myself, husband, 2 year old, and 6 mo. old) are downsizing. We have lived in a 5800 sq. foot house since our children were born and now: (drumroll please), we are moving to a 1400 sq. foot house. We are making a choice to live below our means. We chose to stay in the same neighborhood, so we are not losing schools, neighbors, etc. We have some financial freedom (an 800$ mortgage will do that), so we are considering this an experiment. I would say go for it, worst that can happen is that you want to move back in a couple of years. People in large cities and even in some of the places I traveled in Europe live in smaller than 1400 sq. feet! 4000$ mortgage vs 800$, $650 gas bill vs $75, 1 AC unit to service vs 4. There are lots of benefits. Can you stay in your same neighborhood so you wouldn’t be changing things up too much?
    PS I noticed that this is a posting from over a year ago, so what did you decide to do?


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