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The Pros and Cons of Downsizing Your Home: Is It Right for You?

Should You Reduce Financial Strains by Downsizing Your Home?

Reviewing the Pros & Cons of Downsizing Your Home.

The decision to start downsizing your home isn’t easy. You likely feel a sense of attachment, whether you lived at the same address for five years or forty. Though you’ve grown accustomed to your current situation, it’s essential to acknowledge when your circumstances have changed and embrace the transition.

In truth, downsizing your home has a variety of appealing benefits. With a significant reduction in your mortgage payments, utilities, and property insurance, you’ll have a far better handle on your finances. You’ll also worry less over maintenance and have more freedom from your possessions.

So what should you keep in mind if you’re unsure whether to move to a smaller home? How will it help to reduce your financial strain, and how do you know if you can handle less space? We’ll answer those questions and others like them, looking at the subject of downsizing in greater detail.

The Benefits of Downsizing

Downsizing is an effective solution for eliminating debt. It’s far easier to manage the amount of money you owe when you spend less on your mortgage. Without the financial burden of your previous payments, you’ll have more to put toward credit cards, loans, medical bills, and other sources of debt.

You can also use the proceeds from the sale of your former home to pay cash for your next one. It’s possible to cover the full price of your new home without taking out a major mortgage, depending on the size of your previous property. You’ll have far more freedom without the constant pressure of a sizable mortgage payment every month.

It’s also important to think about the flexibility of your new situation. As you continue to pay down your debt, you won’t feel as much anxiety over what you buy, whether seeing a movie or going out to eat. You won’t double-think your purchasing decisions as often, and it’ll improve your overall quality of life.

Beyond these immediate benefits, you should also give thought to your long-term plans. Placing a portion of the profits from your home sale in your retirement fund can help ensure your financial security in your later years. It’s a small consideration, but it has far-reaching implications for your future comfort.

Reasons Why Downsizing Might Save Your Money:

  1. Reduced mortgage payments: A smaller home means a smaller mortgage payment, which can save you a significant amount of money over time.
  2. Lower utility bills: Smaller homes typically require less energy to heat and cool, which can result in lower utility bills.
  3. Reduced property taxes: A smaller home will likely have a lower assessed value, which means lower property taxes.
  4. Lower maintenance costs: A smaller home requires less maintenance and repairs, which can save you money in the long run.
  5. Lower insurance costs: A smaller home typically requires less insurance coverage, which can result in lower insurance costs.
  6. Lower home furnishings costs: A smaller home requires less furniture and home furnishings, which can result in significant savings.

The Drawbacks of Downsizing

As mentioned earlier, you likely feel a sense of attachment to the place where you live. It’s full of emotional memories, where you spent time with loved ones, celebrated birthdays, or raised children. Many people find it difficult to part with their previous homes, and those feelings can overwhelm them.

You should also think about the size of your living space. American homes have tripled in size over the past 50 years, and downsizing might force you to contend with the materialism inherent in our culture. You won’t have as many closets or rooms for storage, and you may have to place your belongings elsewhere. Otherwise, you’ll have to discard or sell them, which is also painful if the items have sentimental value.

Aside from storage, your limited square footage may cause other problems. It could prove inconvenient when you have guests over, and if you enjoy hosting parties, you may have to take them outside to your yard — weather permitting. In other words, you’ll have to account for the restrictions of your home.

The process of selling your home may present its own set of challenges. Do you need to make repairs before your home is market-ready, and will your appliances fit in your new space? Downsizing may have its share of benefits, but it also poses some tough questions you’ll have to answer.

Reasons Why Downsizing Might Not Be in Your Best Interest:

  1. Limited space: Downsizing can mean giving up space that you may have grown accustomed to, which can be difficult if you have a large family or frequently host guests.
  2. Emotional attachment: If you have a strong emotional attachment to your current home, downsizing can be a difficult decision.
  3. Moving costs: Downsizing often involves a move, which can be expensive, especially if you are moving a long distance.
  4. Home value: Downsizing can mean giving up a home that has appreciated in value, which can result in a loss of equity.
  5. Lifestyle changes: Downsizing may require changes in your lifestyle, such as living in a different neighborhood or giving up certain amenities or luxuries that you may have grown accustomed to.

How to Know When You’re Ready

It’s natural to feel hesitant when selling your home. It’s your home, after all, and it’s hard to leave it behind when it’s become such a familiar touchstone in your life. Still, you need to look past those initial feelings of reluctance and examine the opportunities that come with downsizing.

As you continue, consider the negative aspects of downsizing as well. You won’t know if you’re ready until you fully explore the option, with everything it entails. Once you review the advantages and disadvantages of downsizing — and your current situation — you’ll feel far more confident in your choice.

Is Downsizing Right for You?

The decision to downsize your home isn’t easy, but sometimes it’s necessary. That’s okay, and many people in your position have embraced the change with optimism and a positive mindset. They accepted that having more of something isn’t the same as getting the most from it.

With that in mind, evaluate your available options and determine if downsizing is right for you. You may see the value in a smaller home, or you may decide to stay at your current property. Whatever you choose, you’re making the right decision for your unique set of circumstances.

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NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

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  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

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Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).