Downsizing your house

[Fireby2030]

Here is our current situation. We built our house in 2015, looking back we probably spent a little bit more then we should have even though we can easily afford the house.

Currently appraisal value is 690k, taxes are 6.5k and insurance is 1.7k. Utilities are around 325 a month, including elec,water,trash,recycling, gas. Currently we are refinancing from a 7 year arm at 3.5 to a 15 year fixed at 3.5. We want to pay it off earlier but there is always the question between paying off the house vs investing so we want to give ourselves options. Our mortgage payment will go from 3.2k to 3.8k and we will always pay at least 3k extra towards principle every month. After the refinance we will have 200k equity since we are bringing 30k to closing.

The wife and I are considering selling the house and downsizing to something smaller, I want to do this a bit more then she does. We would look for something around 400-450k and look to invest the difference between the house. Also we would be able to pay off the smaller house faster.

While we both like our current house, my wife has a little emotional attachment to it since she picked almost every feature to the house to her liking and that our kids have spent the last 4 years growing up in it.

We are in no rush to sell our current home and my current thought is that we will downsize if we find the right house at the right price.

Looked at a few houses in our area that are in the same school system today and one was an older home built 14 years ago and was a bit dated and the other was just not a fit for our family. In the price range of 400-450k we are most likely only going to find older homes and I kinda wanna get a deal on a house if we move.

Wondering what the forums thoughts are, am I wrong in the thought of downsizing to invest the difference and to decrease yearly expenses? If my thinking is correct should I push my wife to be progress with this a bit faster, currently I told her if it took 2-3 years to move that would be fine with me. However I do want to FIRE in 10 years so every year counts for that money to get to work.

 

[Ronstar]

I'd say start decluttering your current house, and keep your eye out for smaller houses that you and your DW like in areas that you like. I don't think that you should "push" your DW to go at this faster. Take your time and make sure that you get the right house for both of you. IMO, finding the right house is more important than the amount of money you'll gain by downsizing.

 

[DrRoy]

Do consider that closing costs and moving could run you up to $60K.

 

[Amethyst]

+1. And don't downsize too severely. You will still need your own spaces.

I'd say start decluttering your current house, and keep your eye out for smaller houses that you and your DW like in areas that you like. I don't think that you should "push" your DW to go at this faster. Take your time and make sure that you get the right house for both of you. IMO, finding the right house is more important than the amount of money you'll gain by downsizing.

 

[Bamaman]

You went with a ARM originally when fixed rate financing was at incredibly low rates. Most homeowners would have chosen to go fixed rate. ? ? ? In looking at Ft. Wayne real estate online, it appears you're in a fairly priced real estate market. Modern $690K homes appear to be in the 5500 square ft. range, where $450K homes appear more like 4500 square ft.

You didn't share more about your current financial condition. If you're serious about getting to FIRE in 10 years, you may need to make a much larger sacrifice than dropping to a 4500 square ft. home. There are many perfectly decent homes at substantially less prices with far less utilities, taxes, etc. And $690K homes are in a price range that doesn't sell nearly as fast in most locales.

 

[Teacher Terry]

Unless you have 6 kids you don’t need that much space so I vote for downsizing.

 

[JDARNELL]

We just went from 4400 to 1200. Love it!

 

[tb001]

My input is that you need to make sure your wife is 100% on board with your plan. I would have a very hard time selling a house I’d just built and loved, unless I got excited about renovating another, which might defeat the purpose of moving.

 

[RE2Boys]

Here is our current situation. We built our house in 2015, looking back we probably spent a little bit more then we should have even though we can easily afford the house.



The wife and I are considering selling the house and downsizing to something smaller, I want to do this a bit more then she does. We would look for something around 400-450k and look to invest the difference between the house. Also we would be able to pay off the smaller house faster.

While we both like our current house, my wife has a little emotional attachment to it since she picked almost every feature to the house to her liking and that our kids have spent the last 4 years growing up in it.

I'd stay put. A lot of work and emotion goes into building a family home. And you'd walk away from it to pursue a dream of potentially retiring early? Enjoy the kids while they are young and save money in other areas, such as forego adult toys and cars, take modest vacations, LBYM.

We moved 15 years ago due to elderly parent situation and the biggest regret was giving up our custom built home that we dreamed raising our two son's in. We even toyed with the idea of rebuilding it in our new city.

And transaction costs of selling and buying houses will take a chunk of cash.

 

[SumDay]

In our area, smaller homes are selling for more than the bigger homes. Can't really go by square footage around here. Lots of people are downsizing, and so many kids have student loan debt that they can't afford to buy the "bigger" houses.

Agree with the decluttering suggestion. It took us 4 months. If you get a head start on it, it will help.

And definitely get DW on board. If you have home tours in your area, gently suggest you guys walk through one or three, just to see what a smaller home looks and feels like, and what they cost. She may be wowed by some high-tech kitchen and jump on the moving bandwagon.

And yes, closing costs, moving, redecorating, etc., take a BIG chunk of cash. Factor that into your decision.

Good luck, and keep us posted.

 

[Fireby2030]

Let me defend our choice to go with the ARM 4 years ago with a little more back story and financial data. I graduated with a BA in economics and worked in business for 2 years before pursing a career in medicine. Fast forward and I graduated fellowship at the age of 35. We decided to build our house and wanted the flexibility to either invest or pay off the house early. If you have been in your mid 30's and had less then 100k for retirement then you can probably sympathize with the how far behind I felt. Regardless of my income I delayed 10 years of compounding in the market. Now at 39 we have a little over 1m invested in our 401k, roth, and taxable accounts. We make a very good income but I am under no delusion that this will continue in the future so part of my wanting to downsize is to free up more cash to invest. If our income stays close to what we are currently making we will invest nearly 250-300k a year for retirement vs 150k + pay down the any mortgage in 5-6 years. Though I go back and forth on to either pay down the mortgage vs invest it given the current state of the market.

I agree that transaction costs will decrease the amount of equity we net through a house sale, but I have been toying with the idea of selling by owner. Also I would contact real estate agents and see if they would be willing to lower commissions if we sold and purchased through them. The costs would still be annoying and definitely something to consider.

Thank you for the comments/advice, they makes me lean towards not selling our house.

 

[AS2019]

I did the exact same things 18 months ago. The only difference is that I’m single, so there was no spouse to have to convince. I moved from 4,000 sq ft $600k dream house that was just too big to 1,200 sq ft 1960s ranch. My 16 yo daughter loves the smaller house because it requires that we Interact with each other more because of the small space. I miss the bigger house, but I was able to convert several hundred thousand of equity into taxable retirement accounts. I think to myself, “is having more room worth several hundred thousand dollars?” And the answer for me is always “No”. Just like having the sports car that I drove once a month wasn’t worth (to me) the thousands of dollars that it cost. The sports car is gone too.

 

[pacergal]

Here is our current situation. We built our house in 2015, looking back we probably spent a little bit more then we should have even though we can easily afford the house.

Currently appraisal value is 690k, taxes are 6.5k and insurance is 1.7k. Utilities are around 325 a month, including elec,water,trash,recycling, gas. Currently we are refinancing from a 7 year arm at 3.5 to a 15 year fixed at 3.5. We want to pay it off earlier but there is always the question between paying off the house vs investing so we want to give ourselves options. Our mortgage payment will go from 3.2k to 3.8k and we will always pay at least 3k extra towards principle every month. After the refinance we will have 200k equity since we are bringing 30k to closing.

The wife and I are considering selling the house and downsizing to something smaller, I want to do this a bit more then she does. We would look for something around 400-450k and look to invest the difference between the house. Also we would be able to pay off the smaller house faster.

While we both like our current house, my wife has a little emotional attachment to it since she picked almost every feature to the house to her liking and that our kids have spent the last 4 years growing up in it.

We are in no rush to sell our current home and my current thought is that we will downsize if we find the right house at the right price......

Why not stay where you are at and invest the $3000 every month? You have a 15 year mortgage at a low rate, you can always pay it later if/when you find the right house. I'm sure you could earn more than 3.5% on the money you save on prepaying the principal

 

[LiveBelowMeans]

You should stay. I can’t imagine all the emotion, blood sweat and tears that went into building this house only 4 years ago. Wait till the kids are out of the house and then downsize. You have an excellent income now and will be able to save a significant amount each year. You don’t need to put your family thru the drama of finding a new house, moving, getting established in a new neighborhood school etc. Patience..... JMHO

 

[W2R]

I think most people would be better off downsizing, but some would not! A lot depends on you and your DW, your age, your financial situation, and so much more. With only 7 posts, 2 of which are in this thread, I don't feel like I have the depth of knowledge about you I would need to advise you one way or the other.

I can say that FOR ME, a 71-year-old introvert who never entertains or has anybody over at all except Frank, a small house is so much preferable to a large house. Honestly if I was stuck with a house the size and expense of yours, I'd be extremely upset about it, not only because of the expense, but also because such a big house just does not meet my needs or desires and could potentially cost me a lot in both time and dollars to maintain. My kneejerk reaction when I hear about people living in coastal areas with zillion dollar homes as big as the Taj Mahal, is to sort of snicker and assume that they would be far happier in a smaller house in flyover country. But that's just projecting my situation onto them, and really not one bit fair.

And do consider this:

Do consider that closing costs and moving could run you up to $60K.

In my case, it was a little over $58K more than just the diffence in sales prices, to move from a 1600 sf home to a 1500 sf home. That included everything, though, even minor repairs on my prior home, inspectors for my new home, surveyor to determine elevation of my new home (for better flood insurance rates), and so much more. Also it included the costs of maintaining two homes while my prior home was on the market and in escrow (after I moved), and some upgrades on my present home plus a truly giant landscaping project, re-doing the termite barrier, and then moving supplies and moving. The realtors' commission was $11K, basically peanuts compared with the rest of it, and also in my case I feel I got a much better deal on both selling and buying than I would have had I tried to do it myself; I saved several times that amount by using my realtor (YMMV, obviously!).

My present "Dream Home", while smaller, is in a better neighborhood and nicer so the sales price was higher. Including the difference in sales prices, the move cost me a grand total of $92,603.

 

[NgineER]

You should stay - if you were selling, then I don't see the advantage of refinancing.
I'd also vote for not paying down the mortgage any faster than a 15 year mortgage. Invest the extra mortgage payment instead and pay off the mortgage when you retire in 10 years.

 

[Audie Murphy]

In your shoes I would pay off the current house as fast as possible. The property will always be an asset that you can cash in or not. It sounds like a wonderful home that you may regret selling later. Your retirement is in good shape especially when you add time and compounded interest. The sooner you are free of your mortgage the sooner you can decide when is the right time for a FIRE.

 

[ziggy29]

To me, downsizing sounds like it makes sense, but.... "happy wife, happy life" and all that. I would agree with the advice above about decluttering and downsizing your *stuff* anyway. Even if you don't move now, being able to live with "less stuff" would go a long way toward showing that a smaller, less costly home is not only feasible, but possibly desirable. I'd start doing these things, but as for the move itself, I wouldn't rush it or push it. Moves are very stressful. It needs to be *really* worth it.

 

[RobbieB]

Yeah, I see no need for haste either. But getting rid of stairs before you get old is always a good idea.

 

[Aerides]

Stay put. the costs and stress of moving will eat into that price difference more than you expect. And the few repairs and upgrades that might (will) be needed for the next place...Your family likes your home and they are happy there. You can afford it. Stay.

 

[timo2]

cleaning out the any excess material goods is always a positive. However, make sure everyone involved has the same view of what is 'excess'.

 

[Bamaman]

Thanks for filling in the holes on your situation. I understand how reluctant you would be to greatly downsize given your earnings potential. My wife worked in the medical field, and she has many friends that are physicians. But we only know of one anesthesiologist (pain management) that actually retired at age 50--to open a camera store. Most doctors seem to be working to age 70 or so.

My internist and I talk often, and he's mid 60's, still working and rather typical. He had a medium to large home and kids that went to private schools and colleges. One daughter just finished her residency at Cleveland Clinic and is now working at a fine big city hospital--as is her M.D. husband. My doctor was the last to computerize, and he's tired of fighting insurance companies and Medicare daily on how to treat patients. He would like to retire, but I get the idea he doesn't have the $6 to $7 million in his retirement account that it would take to maintain his current lifestyle.

I have two friends that are brothers and one was an orthopedic surgeon and the other an anesthesiologist. One is now a 2000 acre farmer and his brother is a state senator, farmer and runs a medical trials business in his spare time. Both had health issues.

Congratulations on the hard work and dedication that it's taken to get where you are. I certainly hope you can bail out in another 10 years into ER.

 

[Fireby2030]

Thanks for all the posts and advice. I will say that we are currently cleaning out the junk, while we did not think we were spoiling our kids it became very clear that they did not appreciate the plethora of toys they had. So today we cleaned out the basement and let them choose 4 toys each, rest will be donated. We told them no more toys from mom and dad, something you want,something you need,something to wear and something to read is what santa will bring every christmas.

The downsizing will continue with my wife and I as well to show the kids that we practice what we preach. I have a 2017 M4 that I don't get to drive as much as I would like and in the spirit of decluttering its getting sold shortly

I believe my recent feelings are based around the up coming election and the possible massive changes to healthcare and while I cannot control the ultimate outcome I want to put my family in the best situation.

I believe we will stay live even lower beyond our means, prevent unwanted consumption and junk that seems to accumulate out of nowhere.

My wife will be so surprised and thrilled when I tell her we will just stay! Thanks again.

To the paying down the mortgage I am still riding the fence. Part of me dreams of not having a mortgage but at the end of the day it really comes down to our NW to become FI and possibly RE.

 

[mpeirce]

Another person advising stay.

My thinking the economic benefit is there, but not huge, if you sell.

On the other hand, selling and moving is a pretty big disrupter of the family status quo. It'll add additional stress to your life - and your kids. I lived in the same place my entire childhood and it was very nice. Same schools, same friends, same bedroom, etc. It's OK to move if there's a good reason, but continuing to provide a stable home for your kids is definitely in the plus column as a reason to stay.

 

[gerntz]

We bought our 1900 sf main floor house with 2 BR's there 33 years ago with the intent of staying put. That hasn't changed yet.