Downsizing into a smaller home has been a rite of passage almost exclusively for empty-nesters and retirees. But as home prices and mortgage rates rise and the inventory of homes for sale shrinks, younger generations might find upsides to downsizing earlier in life.
If you don’t need a bigger home, downsizing earlier could work in your favor. Here are three reasons why:
1. You’ll free up money for other financial goals. If you have a bigger home, much of your income is tied up in monthly mortgage payments. By getting a smaller, more affordable place, you could free up cash to put to work toward other goals such as college savings or retirement.
2. You could move into a better neighborhood. Most homeowners (whether they have kids or not) want to live in a desirable neighborhood where they can put down roots. Choosing a smaller place in a sought-after area over more space elsewhere is a trade-off with a lot of potential upside: better schools, increased walkability, more charm or lower crime.
3. You’ll simplify your life. A bigger home comes with more maintenance, costs and potential wasted space — all things you might not have anticipated. This is especially true if you’re now going through a major life event such as a divorce, illness or job change. In addition to less upkeep, downsizing can also provide financial peace of mind if you feel suffocated by your mortgage payments and other debts.
Some people are afraid of debt. They don’t mind living a simpler life to pay their home off faster and gain the confidence and comfort of being debt-free.