Downgrade Your Home (247/365)

We live in a home with two stories and a finished basement. It’s a nice home, one that we’re all comfortable living in.

However, if there was a financial need to do so, we could easily close off the finished basement. Everything we use it for could potentially be moved to the main floor, though we would have to start making some difficult decisions about possessions.

Beyond that, if it was necessary, we would also be fine shrinking the size of the master bedroom a little bit and eliminating one of the bathrooms.

In short, our life wouldn’t suffer too much if we eliminated almost half of the square footage of our home. It would be a bit different than where we live now, but we could make it work.

Downgrade Your Home (247/365)

The same thing is true for many families I know. They could easily make it in a home smaller than the one they live in. They might have significantly less space than before and they might need to rethink their possessions a bit, but it would work.

If this is true for you – and it probably is – one powerful response to your financial situation is to simply downgrade your home.

It’s easy to do. Simply look on the housing market for homes smaller than your own, ones in different locations, and ones with a bit less “curbside appeal.” The goal is to find still-appealing houses for you that will get you out from under a crushing mortgage.

This doesn’t mean moving into a “cheap” or junky house. You’re simply looking for a house that works for you by eliminating the things you don’t really need (extra rooms, unnecessary finishings) and focusing only on the things you do need.

This also doesn’t have to be a permanent move, as it can merely provide you a big financial boost until you get all of your debt under control (though you may find a smaller house is the right size for you).

In fact, right now is an excellent time to do this, as home mortgage rates are very low as of this writing.

Let’s look at a potential real-world example of this. Let’s say you bought a $250,000 home with a $200K 5% thirty year mortgage a few years ago. Your monthly mortgage payment is $1,073.64 and your insurance and property taxes are painful. You’ve paid the mortgage down to about $185K and you think the home would sell right now for $240K, so you’d net $55K out of the home.

So, you go out on the market and find a home that works for you for $150K. You arrange a $95K mortgage at 4% to pay for the balance. Your monthly mortgage payment (for a 30 year) drops to $453.54, your property taxes drop by half, and your homeowners insurance drops, too. You’re literally saving a thousand dollars a month with this move. That difference can completely turn around your financial life.

Consider downsizing if you’re struggling with your mortgage. A smaller house can have almost everything you need, without that giant mortgage payment you don’t need.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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