If you're at or approaching your golden years, you may be considering whether you want to downsize your housing.
With all your children out of the house, you may not have a need for so much space. You might be able to trade in your four-bedroom, three-bath house for a condo or townhome in an urban area. However, after years of hard work, you may be ready to live a more lavish lifestyle. You've saved, and there's a luxury house you've had your eye on for some time. So are you going to downsize or upsize, or would it be better to stay at your current house and make some improvements?
How much is your current house worth?
After paying off your mortgage or at least gaining a sizeable amount of equity over the years, you may think your property can fetch a tidy profit on the market. However, your home may be worth less than you think.
While this scenario may not present a challenge for downsizing, it can hamper your plans for purchasing a mansion. Without a reasonable profit from your current home, you may not be able to afford something bigger.
How much work do you want to do?
If you view retirement as a time of peace and relaxation, you probably want something that's move-in ready. Although a home inspection may reveal a new luxury home doesn't require any repairs, you'll still have to take care of maintenance over time. This means cleaning all those extra bedrooms, mowing the sprawling lawn and cleaning the in-ground swimming pool.
Many condo communities have some maintenance included as part of the amenities, which can be beneficial if your mobility declines over the years. If you stay at your current home, you may not get maintenance help, but you at least know what to expect.
How much can you afford for monthly expenses?
The size of your retirement property will determine how much you'll pay for utilities, property taxes and other expenses. Larger properties are not only more expensive to purchase, but they are also more costly over time. Chat with your financial adviser to find out if your nest egg can handle upsizing, and if so, to what extent.
Also, keep in mind staying in your current house or downsizing don't necessarily mean you'll save money. Your spending habits also come into play, and a smaller property may not be cheaper if you're buying in an expensive community.