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When it comes to your home, is downsizing a good idea?

Everyone wants a large home in a prestigious neighborhood but there are some drawbacks that should be considered. Even if you can afford to buy a bigger home, it's not just the monthly mortgage payment that you have to worry about.

Along with the mortgage payment comes higher property taxes, a higher homeowner's insurance policy, higher utility bills, and higher maintenance costs. The higher costs may not hurt when you are young and working a good job, but later in life, the costs may make a greater impact on your lifestyle.

What you can afford today may be drastically reduced when you retire. As a person nears retirement age, all of this comes into play. Your retirement income will probably be much less than your take home pay from your job. This means less income for paying the same monthly bills.

This is why many people who are close to retiring start looking to reduce their monthly expenditures. One of the best ways to downsize your monthly bills is to downsize your home and your living expenses. You have to look at how you can make adjustments to your living arrangements while maintaining the lifestyle you've become accustomed to.

Some people welcome the opportunity to downsize by buying a smaller home, a condominium, or a townhouse while other's want to keep the larger homes. This is predicated on a person's personal preferences, not necessarily on their needs.

Remember, the things you wanted when you were younger may not be as important to you as you get older. Buying a smaller home or renting a smaller apartment may work for you, especially if you have grown children and they are no long living with you.

Calculate your monthly bills and see if they can be covered comfortably by your retirement income. If they can, you may not have anything to worry about, but if your income falls short, you may need to start thinking about how you will manage.

By downsizing, you can:

  • Lower your mortgage payments
  • Lower your property taxes
  • Lower your homeowner's insurance
  • Lower your utility bills
  • Lower your maintenance costs

If you buy a smaller home, you may be able to save more money and keep the lifestyle you already enjoy.

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