Downsizing Your Home the Right Way

Who wants to move down in life? Down sounds bad—like you’re being left behind or getting less out of life. Up sounds so much more, well, up! But when it comes to homeownership, down might be just what the doctor ordered.

While it may be an emotional experience leaving a home you’ve lived in for many years (even decades), downsizing comes with a lot of practical benefits that could make a big impact on your future.

Thinking about downsizing your home? Let’s walk through all the details and see if downsizing is the right move for you.

Why Downsize Your Home?

Some people think moving up in life means buying a bigger home—well, it’s time to set the record straight. Most American families have plenty of room to downsize their home without cramping their style.

Consider the numbers: The average new single-family home comes in at nearly 2,400 square feet.¹ You may not think that’s very big until you look back at history. The average home size in 1975 was almost 1,000 square feet less than homes built today—and families were bigger back then.^2,3 By those standards, today’s homeowners are living large!

Having a large home is nice, but what happens when it isn’t necessary? Maybe you’re new empty nesters, the kids have moved away, and you want less space between you and your spouse. Maybe you’re moving an aging parent out of their home because they can’t take care of it (or themselves). Or maybe you bought too much house to begin with and it’s become more of a burden than a blessing.

Moving into a smaller home may feel like a step down, but a closer look reveals quite a few upsides: saving money, saving time and having less clutter in your life. Downsizing could be just the fresh start you and your family need.

Emotional Reasons That Prevent Downsizing

If you never thought you were sentimental about your home, try putting it up for sale. Suddenly every nook and cranny is the source of some sweet memory that makes you second-guess your decision to move.

The decision to downsize your home can be difficult to make—and following through can be even tougher, even when you know it’s for the best. Here are some common reasons why you could feel emotional stress about downsizing:

You’re leaving memories behind.

You raised your kids and made a million memories within the walls of your home. The thought of leaving it may break your heart, but we’ll give you some tips for keeping the most important memories with you.

Your family is making you feel guilty.

Your adult children might make you feel guilty for leaving the place that holds their childhood memories. Or if your folks live with you, they may throw the guilt on you for “forcing” them to move from their home (even if a move would be better for them). But never let your kids or parents dictate what’s best for you. Besides, think of how much fun the grandkids will have making new memories in your cozier house when they visit for the holidays. Or how much easier life will be for your folks when they don’t have stairs in the house.

You’re afraid of change. 

Are you paralyzed by all the unknowns that come with downsizing your home? Or maybe you feel overwhelmed by all the work your home needs before it goes on the market. We get it. But putting together a clear plan will help calm your fears.

You want to keep up with the Joneses.

Moving to a smaller home might be a humbling experience—especially if your friends have large houses and might look at you sideways in confusion. But you have to do what’s best for your family, no matter what anyone else thinks. Real friends would understand that. And who knows? Maybe when you’re free from the unnecessary burdens of a larger house, you’ll inspire them to follow.

Benefits of Downsizing

To stop these emotions from holding you back, focus on the practical benefits of downsizing. That’s right . . . it’s time to bring out the big guns and talk money. Moving into a smaller, less expensive home could reduce your stress, make life simpler, and help you make huge progress with your financial goals.

Find expert agents to help you sell your home.

Think about it. Are you one of those empty nesters we mentioned earlier who still lives in that big house where you raised your now-grown kids? Imagine how much time and money you could free up if you downsized! Instead of managing the upkeep of the house and lawn, you could spend more time and money on vacations and date nights. And you could have plenty of cash left over to invest more for your dream retirement.

Let’s look at what could happen if you reduced your mortgage by just $500. Check out three financial strides you could make:

Attack Your Debt

If you’re working hard to kick debt to the curb, downsizing your home is a huge way to crank up your intensity. Let’s say you owe $18,000 on a student loan. With a 6% interest rate and a minimum payment of $200 a month, you’ll be paying on that loan for 10 more years.

But throw an additional $500 at your loan each month, and you’d trim a whopping seven-plus years off your payoff date. Sallie Mae will have to find a new place to live because you’ll be free from student debt in less than two and a half years!

Boost Your Retirement Fund

Once you’re debt-free with a fully funded emergency fund, it’s time to build wealth for the future. We recommend investing 15% of your household income in a tax-advantaged retirement account—like a Roth 401(k) or IRA.

And, boy, an extra $500 can really add some fuel to the fire. In 30 years, you could have an additional $1.1–1.7 million in the bank to get you through your golden years. You can do a lot of living and giving with that nest egg.

Pay Off Your Mortgage

Okay, here’s one more smart way to use the extra money you get from downsizing your home: Trade in your mortgage for a paid-off home. Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down!

If you can’t pay cash, get a 15-year fixed-rate mortgage and put at least 20% down on your new home. Apply the $500 you saved from downsizing to your new monthly payment.

Use our mortgage payoff calculator to see how quickly you can pay off your house.

How to Downsize Your Home the Right Way

Smaller mortgage payments and less time spent dusting those spare rooms may sound like a dream come true, but is downsizing really the right move for you? Before you head down the path toward downsizing, here are some tips to make sure your downsizing dream doesn’t become a costly mistake.

Think Long Term

If you’re thinking about downsizing your house, planning ahead will set you up for success. Do you need extra space for that freelance business you’re planning to start? Or were you left with more than enough room to spare after the kids moved out? Only you know if you can spare that extra space or if losing it would be more of a headache than it’s worth.

Downsize Your "Stuff" Before Your Home

A bigger house usually means lots of stuff in every corner. Downsizing is a great opportunity to declutter your life. Maybe it’s the bikes your kids learned to ride on, the squeaky wooden bunk bed, or the dusty grand piano. If you don’t use the stuff, why do you have it? Clutter tends to be the source of most of our emotional resistance to downsizing our home.

Downsizing your stuff before you even start the home downsizing process will give you plenty of time to overcome the emotional barriers involved. Sort your belongings into four main categories:

• Keep: Limit yourself here. This category is reserved for items you’ll regularly use after downsizing your home. It may also include a small number of sentimental items—like your wedding video, family photo albums or family heirlooms. If items don’t fit those specs, move them to our next category.

• Give: If your sentimental ties to an item are too strong to break completely, consider giving it to a loved one who will treasure it the same way you have. Or donate it to your favorite charity. Stop clinging to too many things from the past and start making room for all the precious memories ahead.

• Sell: Now that sentimental items are separate and safe, earn some cash with the rest. Host a yard sale or sell stuff online. All that money can go toward your move. Have stuff that won’t sell? That brings us to our final category.

• Trash: If the rest won’t sell, throw it away. After you set aside, give away, or sell the important items, there’s no reason to keep the rest. Throw away that trash and be free!

Even if you don’t end up downsizing your home, you’ll be glad you at least got rid of some stuff. Who knows? Maybe all you actually needed to do was get rid of some stuff and not downsize at all.

Consider Hidden Costs

Downsizing may save you money in those monthly mortgage payments, but what about the hidden costs? Does your home need any repairs to get it market-ready? What about your old furniture and appliances—will they fit into the smaller place, or do you need to bump up that budget for more space-efficient pieces?

And don’t forget to take into account the cost of moving, property taxes, storage or even a higher mortgage interest rate and/or HOA fees. When it comes down to decision time, you may find that taking the leap to a smaller space will save you big-time—or that you can save just by staying right where you are.

Focus on the Big Picture

Downsizing your square footage might mean your family has to gather around one TV at night instead of spreading out across three or four different rooms (gasp!). But is more time with the ones you love really all that bad? Downsizing just might be the kick in the pants you need to spend quality time together.

Ready to Downsize?

Downsizing might not make sense in every situation, but it’s worth a look if you really like the idea of saving money and simplifying your life. Ask an experienced real estate agent to help you determine what your home is worth with a comparative market analysis (CMA) and show you options for cutting the costs of homeownership.

For a quick and easy way to find one of the top agents in your area, try our RamseyTrusted^® program. The pros we recommend know what it takes to get top dollar for your current home and negotiate the best deal on a new one.