Many homeowners are still feeling the pinch of the recent recession and are seeking out ways to free up some equity and improve cash flow. One of the simplest ways that a homeowner can reverse their financial situation is by downsizing, i.e. selling their larger home and buying a smaller, less expensive home instead. Of course as with anything in life, downsizing comes with its own pros and cons:
The Pros of Downsizing:
- Increased cash flow – Your monthly mortgage repayments would be lower on a smaller property, meaning more disposable income available to you. It may even be possible to purchase your new, smaller home outright with the profit from the sale of your larger house. You could use your new-found disposable income to employ a high end interior design service, they can make your new home look fantastic and help you to maximize your new, smaller space in terms of storage.
- Reduced utility bills – It goes without saying that a smaller home will be much cheaper to run. With smaller rooms and less of them to heat you’ll find your energy bills are significantly reduced, and your home will be much kinder to the environment too.
- Increased free time – With fewer rooms in your house that need cleaning you’ll find that housework doesn’t take quite as long, leaving you with more time to do the things that you actually want to do.
- Fewer purchases – You may find yourself cutting down on the things that you buy if there is less room to store them. Yes that lamp is nice, but where would you actually put it? A smaller home should make you think twice before buying things that you don’t need.
- Reduced stress – Many homeowners who have chosen to downsize find that the increased cash flow, reduction in housework and increase in free time make them feel much less stressed. The demands of running a large house can take their toll on homeowners, so switching to a smaller house is often a lifestyle choice as well.
The Cons of Downsizing:
- Restricted space – Going from a large home with spacious rooms to a smaller home with smaller rooms can be a shock to the system at first. It will take some time to adjust to having less space in which to manoeuvre. You may also find that you have less option for escaping from annoying family members as there are fewer rooms to hide in.
- No room for guests – Moving to a smaller home usually means that you’ve had to reduce the number of bedrooms and lose the spare room. Throwing family parties now means that guests from out of town will have to stay at a nearby hotel instead.
- Fewer possessions – Homeowners with larger homes tend to fill them with more belongings and can be reluctant to part with things when they still have the room for them. However, downsizing your property also means downsizing your possessions. Most of us form emotional attachments to objects so it can be difficult to part with them; but now is the time to be ruthless and downsize your life as well as your property.
- Damage to social standing – For some people, a large home is a sign to others that they’re in a great financial position and doing well for themselves. Moving to a smaller home might lead people to think that you’re struggling financially rather than reducing your own stress!
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