Home loan too large? Downsize

Moving to a smaller home may make sense and reduce your mortgage

The average size of an American home has been steadily rising for the past forty years. In the mid-1960’s, houses of less than 2000 square feet were quite common, and couples raised families there without giving too much thought to not having enough room. Over the years, as gourmet kitchens and custom bathrooms became the norm, the size of the average house has increased to nearly 2500 feet today. Americans have more room to move around than ever.

There are downsides to having such large houses, however. They cost more; in many parts of the country you can pay $100 or more for every additional square foot of space. And they take up more land, which also costs money. And they get assessed for higher taxes by cities and counties. And they cost more to heat and more to cool than smaller homes. And they have larger yards that require more maintenance. And the more rooms you have, the more rooms you need to clean.

Yes, larger houses are nice, but the luxury of the extra size comes with a lot of negatives. For some people, the disadvantages of large houses outweigh the advantages, and a few of them are downsizing. It’s nice to have a 4000 square foot house, but it’s hardly necessary. Most people can make do just fine with a small size when buying a home.

Here are a few reasons why it may make sense to move to a smaller house:

• They’re cheaper. In some parts of the country, housing prices have increased 25-30% per year in the past five years. If you have struggled to purchase a larger home during this period, you can probably sell it and move into a smaller house for a lot less money. Why take out an Option ARM for an expensive home if you don’t have to? Some people who have done so have actually been able to pay cash for their smaller home, leaving them without a mortgage altogether.
• Shorter commute - Larger houses require larger lots. In many urban areas, empty land is scarce, and the larger homes are being built in the suburbs far from town. By moving to a smaller house, you may be able to move to an older one that is closer to your job.
• Cheaper to maintain - Smaller houses require less heating and cooling, which could save you hundreds of dollars per year. They have smaller lawns, which make yard work easier. There are many ways that a smaller house could save you money besides the savings on the mortgage itself.

Obviously, not everyone is a candidate for moving to a smaller house. If you have a growing family, you are going to see your space needs increase, not decrease. But some people have been buying large houses because they think that they need one when they may find that a smaller one suits them just as well or even better. Before you spend a lot of money on a large home that may be miles away from your job, you should ask yourself if you really need such a large piece of property. If you decide otherwise, you may save yourself a lot of money.