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Some homeowners decide to downsize – normally in their 60’s and 70’s – to smaller homes for reasons such as convenience, less maintenance, a change of lifestyle or even to just save money. Those homeowners are more likely to have large equities and don’t normally feel the same constraints as younger homeowners, including the substantial increase in mortgage rates in the past year.
There may be enough equity in their relinquished home in some cases which will allow them to pay cash for the replacement. However, there are situations where the loan-to-value may be so low that even with higher mortgage rates, it won’t be as expensive as purchasing with a minimum down payment.
There are some downsizers who may be moving from a high-cost area to a lower-cost area where they can get more home for the dollar and may even be able to free up cash for investment or special projects.
More than likely, older homeowners are living in a property above the median price. So for instance, if a seller has a $750,000 home with no mortgage and they’re wanting to downsize to a $500,000 home, 6% mortgage rates are probably not necessarily a concern because they’re going to pay cash. Considering that type of situation, even with the consideration of sales costs on the relinquished home and acquisition costs on the replacement home, there will be cash proceeds available.
So if you have been thinking of downsizing, feel confident that you have different options than first-time buyers becoming a homeowner. Your equity and the fact that you’re buying a smaller home can help you achieve your objectives even in a volatile market.
Let’s connect and explore the different options that are available.
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