As you strategy retirement, you could assume that downsizing to a smaller residence makes plenty of sense. In spite of everything, downsizing can decrease your dwelling prices and scale back the trouble that comes with taking good care of a big home. And in case your children have flown the nest, a few of your bedrooms are most likely gathering mud anyway.
These are actually compelling causes to shift to a less-spacious home. However earlier than you pull the set off, give some thought to the reverse: “upsizing” to a bigger residence that fits your anticipated life-style in retirement. It’s possible you’ll, for instance, desire a home with sufficient area for entertaining buddies and internet hosting members of the family once they go to, or one which has further bedrooms for a house workplace, health club or interest room.
The best selection for you depends upon your finances and your imaginative and prescient for retirement. As you weigh your choices, comply with these steps.
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Determine your finances
Your finances must be a key issue as you establish the dimensions of the home you’ll purchase.
“A purchaser who’s 55 or older has a finances as a result of they’re going to be getting into an period once they’re on a hard and fast earnings,” says Marcie DePlaza, chief working officer of GL Houses in Dawn, Fla., a builder of household and 55+ houses all through Florida.
That’s true even for patrons who can afford houses at increased worth factors, she says. “They’re at all times conscious of their finances and take into accounts what their month-to-month fee might be.”
Your month-to-month bills hinge on whether or not you purchase a house with money or finance a part of the associated fee with a mortgage. Many owners are sitting on substantial residence fairness. In keeping with a report from expertise and information supplier Intercontinental Change, U.S. mortgage holders had a document $17.6 trillion in fairness getting into the second quarter of 2025.
When you’ve got a heap of fairness in your present residence, you might be able to use the proceeds from promoting it to purchase your subsequent residence outright or to make a large down fee, lowering your month-to-month mortgage fee.
(Picture credit score: Getty Pictures)
As you assemble a finances, you’ll want to investigate what your retirement earnings will appear like. For those who don’t, you threat changing into “home poor,” spending a lot of your earnings on your house that you’ve got little left over to cowl different prices.
Ken Johnson, a professor of finance on the College of Mississippi, means that residence patrons comply with the “28% rule,” which mortgage lenders usually use to qualify candidates. Underneath this rule, householders ought to spend not more than 28% of their gross month-to-month earnings on a mortgage fee (together with principal, curiosity, taxes and insurance coverage).
By sticking to this guideline, patrons can keep away from overextending their finances for a house that’s too massive — and too costly — for them. Zillow has a free software that analyzes a house purchaser’s earnings, money owed and down fee to reach on the residence worth they’ll comfortably afford.
Account for extra prices
You’ll additionally have to consider different prices related to homeownership, together with utilities, householders or condominium affiliation assessments, and residential upkeep and restore prices.
For those who don’t have a mortgage fee that rolls in property taxes and householders insurance coverage, you’ll have to plan for these bills individually, too. In keeping with a 2023 evaluation by Zillow and Thumbtack, a home-improvement expertise firm, householders ought to count on to pay a median of $14,155 a 12 months for these so-called hidden prices of homeownership. Annual prices are even increased in dear cities, equivalent to San Francisco ($22,791) and New York Metropolis ($22,776).
These prices usually enhance together with the dimensions of the home — one thing potential patrons ought to bear in mind. “A bigger residence usually comes with a hidden price ticket for escalating upkeep calls for,” says Jack Erb, an economist for Thumbtack.
Bigger houses usually have extra difficult mechanical programs, dearer flooring, counter tops and different finishes, and greater lawns, all of which want extra frequent and dear repairs, he says.
Think about your life-style
Along with your finances, take into consideration your life-style and the way it might change. DePlaza says that many GL Houses patrons initially downsize and later buy a bigger residence as a result of they found that they want more room. “Patrons aren’t at all times certain what their prices are going to be and what their life-style will appear like as a result of it’s all so new once they retire,” she says.
It’s possible you’ll not entertain usually now, however when you’re retired and have extra time to host barbecues or dinner events for buddies and neighbors, the formal eating room that you just didn’t assume you wanted might begin to look fairly good. Equally, having a spare bed room to make use of as a house workplace or health club may change into a necessity.
(Picture credit score: Getty Pictures)
On the flip aspect, you could discover {that a} smaller house is most fitted in any case. Silvana Clark, 72, and her husband, Allan Clark, 74, just lately bought their 2,400-square-foot residence in Bellingham, Wash., for $850,000. The couple relocated to Alexandria, Va., to be nearer to their 2-year-old granddaughter and her dad and mom. The Clarks are presently dwelling in an Airbnb rental whereas they seek for a smaller residence.
“We prefer to journey and take three or 4 abroad journeys of a month or longer yearly, so we don’t want a giant home,” Silvana says. The couple are searching for a low-maintenance residence that’s about 1,200 sq. ft, with two or three bedrooms. They not want a basement or formal lounge, and so they desire a small yard that doesn’t require a lot consideration.
“Once we’re not touring, our granddaughter can go to, so we wish an additional bed room for her,” Silvana says. “She doesn’t care in regards to the measurement of our home — simply the variety of toys which can be there.”
Silvana suggests making an attempt out smaller areas by renting a house on Airbnb for every week, touring in an RV or house-sitting, because the Clarks just lately did in a one-bedroom residence in France.
“Consider whether or not the proximity to your companion goes to bug you in a smaller area,” she says. For those who choose to have loads of room to your self, you most likely gained’t get pleasure from sharing shut quarters.
Take into consideration the format
Whereas measurement is a giant issue, the ground plan of the house you’re contemplating is equally essential. It’s possible you’ll wish to search for a house with a single story or a main bed room on the primary ground so you may age in place.
Take into consideration privateness: Do you actually need your bed room proper subsequent to the visitor bedrooms, or would you like extra separation? For those who resolve to go smaller, components equivalent to vaulted ceilings and huge home windows could make a modestly sized residence really feel extra spacious.
Take note of options and finishes, too. For those who get pleasure from cooking, maybe now’s the time to splurge on professional-grade home equipment and top-of-the-line cabinetry and counter tops.
“Many 55+ patrons are promoting their household houses, which could have been dated,” says DePlaza. “So they need the latest options, and so they wish to ensure the house is only for them as a result of it could possibly be the final one they purchase.”
DePlaza additionally recommends that patrons guarantee their new houses have sufficient storage. Many patrons are giving up homes with basements to maneuver to locations equivalent to Florida, the place basements aren’t widespread. “Whatever the measurement of the house, patrons at all times say they don’t have sufficient storage,” she says.
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