Doing the Math for a Retirement Downsize

Selling the family home and buying a smaller house is a great way to lower your cost of living and pocket some cash for retirement spending — or is it? While downsizing can be a financial gain for older adults, it’s not a sure thing. Use this guide to determine if buying a downsized home is a smart financial move for you.


Calculating the cost of a new home

Home prices are going up in cities across the country. In Atlanta, GA, the average sale price over the last month was $296K. That’s up more than 30% from the same time last year! Of course, prices may be lower or higher depending on your target neighborhood, so research prices in the area you want to live for an accurate number.

High home prices is good news for sellers, but makes it harder to get into a new home after selling yours, and as a senior buyer, you can’t buy just any house in your budget. You need a home that facilitates aging-in-place, which means accessibility features like single-story living, open floor plans, and step-free entrances. Learn more about senior-friendly home design at, and keep their advice in mind as you search.


Determining how much home you can afford

You can’t calculate how much a new home will save you unless you know what your current home is worth. A comparable market analysis from RealtorRob is the best way to assess your home’s value, although online calculators offer a helpful starting point.

Once you know your home’s value, determine your equity in the home. Your equity is the amount of money you’ll have to put into your next home after commissions, transaction costs, and moving expenses. Citizens Bank explains how to calculate your home’s equity.

Your equity doesn’t need to be enough to buy a new home in cash — many seniors find having a mortgage in retirement to be financially advantageous. Rather than tying up all your cash in a home, a mortgage keeps your assets liquid so you have more money for everyday expenses. However, your equity should be enough for a down payment, closing costs, and moving expenses.


What to do when downsizing doesn’t add up

What should seniors do when they can’t afford to sell, but their current home is unmanageable or too expensive? Downsizing is still an option, but it requires additional legwork. 

If your home’s value is suffering because of decades-old decor, invest in professional staging. Professional staging alone can increase a home’s sale price up to 10 percent. Inexpensive home improvements are also a smart investment — sometimes, a fresh coat of paint and a few minor repairs are all you need to attract higher offers.

If you have enough for a big down payment but the mortgage payments are burdensome, consider a reverse mortgage for purchase. With a 50% down payment, you can buy a downsized home and never make a mortgage payment as long as you live in the home. If you plan on living in the home for the rest of your life, a reverse mortgage for purchase could be a smart call. A reverse mortgage for purchase also frees up funds for aging-in-place remodeling.

Downsizing to a smaller home can be more expensive than you think. However, just because a move won’t pad your bank account doesn’t mean it’s not worth it. Downsizing offers a lot of benefits beyond the monetary, like the ability to age on your own terms instead of spending tens of thousands for a room in a care facility. If independence while aging is important to you, talk to RealtorRob and your financial advisor about how you can make downsizing work.

Contact RealtorRob today for a FREE consultation and custom real estate strategy!


Article Contribution: Mike Longsdon, Image via Burst