Thinking of Downsizing Your Home? Here Are 5 Questions to Consider

5 Questions to Ask Before Downsizing Your Home

Most people think of downsizing a house as something that is just for empty nesters who have sent their kids off to college and are rattling around in a home that's overly large for just one or two people. Admittedly, that is one of the most typical reasons to consider downsizing your home. But there are other good reasons and moments in life when downsizing may make plenty of sense, such as a desire for a more minimalist lifestyle that is less centered around belongings or the need for a home that is easier to manage and more accommodating to those with reduced mobility. At the same time, it's a huge decision to make, and the following process can feel overwhelming and fraught with hidden pitfalls.

If you're currently pondering whether downsizing your home is the right move for you, there are a few questions you can ask yourself to get to the bottom of it and make a choice that you'll be happy with for years to come. Take the time to ask and answer these questions, and you'll have a much clearer idea of whether or not downsizing your home should be the next major step in your life's journey.

1. Can I Save Money By Downsizing?

Homeowners usually don't enjoy the actual moving part of a relocation, and that makes sense because, frankly, it's a lot of work to pack up absolutely everything you own—not to mention the stress of watching it be loaded onto a moving truck and wondering if their belongings are covered with a moving company. But downsizing your home can be well worth it for multiple reasons, not the least of which is the possibility of saving a considerable amount of money over time.

Downsizing a house can potentially save you money. A smaller home typically comes with a lower mortgage and reduced property taxes, and savings on reduced maintenance and repair requirements can also be significant. It's also well worth noting that your home insurance costs will likely decrease because you'll have less to insure—both in terms of the scope of the actual property and the contents of your home—and therefore, you'll have lower coverage limits and lower premiums. And, of course, if you have owned your current home for some time, you've likely got lots of equity built up that you can cash out when you sell. Purchasing a smaller, less expensive home will leave you with funds left over from the sale, not to mention freedom from a long, drawn-out mortgage term.

Furthermore, a smaller home will require less energy to keep cool or warm, so your monthly utility bills will also be significantly lower. And that's extra cash you get to keep in your savings account.

2. Are There Hidden Costs to Downsizing a Home?

While there's plenty of potential to save money when downsizing your home, there is also the potential to incur additional costs that you may not have initially considered. Many of the extra costs that come with downsizing are upfront expenses, which means the year of your relocation will likely be costly. Still, your expenses will smooth out over time, and you'll be in a better financial position in the long run. Those upfront costs include the expense of the actual move itself, the selling price and closing costs of your new home, real estate agent fees, purchasing new appliances for your new house if necessary, and so on.

Another significant potential expense is updating your current house before you sell it on the real estate market. You don't have to remodel your kitchen or bathroom, though doing so could add value to your property and help you generate interest from prospective home buyers. But you may have to make some major repairs before you can sell, such as fixing an old damaged roof, a cracked foundation or a crumbling retaining wall, and those repair projects can be very costly, especially if you need to take care of more than one central area of the property.

3. Will I Still Have the Space I Need?

Downsizing your house is, by definition, the process of moving from a larger home to a smaller one. It makes sense to assume that the volume of belongings you currently own matches the space you currently have available—after all, most people don't have many empty rooms with no furniture or items in them. If you do, you're already over one of the biggest hurdles of downsizing.

When you move to a smaller home, you must reduce the amount of stuff you'll bring. For some people, that's not really a problem. You only really use your living room, kitchen and bedroom, leaving areas like a dining room, study, rec room, and multiple bedrooms alone to gather dust. Suppose that's the case in your household. In that case, you've got a pretty straightforward template of where you can start cutting down on furniture and other items. However, decluttering isn't always easy, especially if they are sentimental items.

On the other hand, if you love hosting dinner parties with all your friends regularly, or your extended family members visit often and stay overnight in your spare bedrooms, the extra space is being used. It is a big part of your current lifestyle. Downsizing your home won't just be a relocation; it'll be a significant adjustment in how you live and socialize, so it's important to consider whether that's a change you'll be willing and able to make happily. Suppose you love your current comfortable living space but are still planning to downsize. In that case, it's recommended that you carefully assess how much space you need in order not to jeopardize your quality of life.

Another aspect worth considering is sentimentality. You may not use or look at all your belongings, but that doesn't necessarily mean you're ready to let everything go. Suppose it breaks your heart to think of setting your mother's antique furniture out on the driveway for a garage sale, or you can't stand the thought of tossing those boxes of your children's old art projects in the recycling bin. In that case, you'll end up having to incur the extra cost of storing them elsewhere after you move to a smaller property.

A great way to begin is creating a home inventory list before you begin the process of looking for a new home, as this will allow you to take stock of all your items, which ones you are willing to part with and which ones you’ll want to keep. Also, creating a moving checklist will give you the peace of mind that you are appropriately packed, and nothing will be lost or forgotten. 

4. How Will Downsizing My House Impact My Insurance Coverage?

Your homeowner's insurance should be a manageable block in your decision of whether or not to downsize. Still, the downsizing process of your home will affect your insurance coverage, so it's worth considering before you start your relocation. As we mentioned above, you will likely be able to save some money on your insurance premiums for your new home because it will be smaller, and you'll have fewer belongings. That means the cost of rebuilding your home and replacing all your belongings will be less expensive if the worst happens and your property suffers a catastrophic event like a fire or natural disaster, so your coverage limits can be lower; of course, that means your insurance premiums will be lower as well.

In terms of your insurance coverage, the best course of action is to call your Morison Insurance broker before you begin the process of downsizing your home, as they can offer you some advice to make the whole thing go as smoothly as possible, and also get started on finding the right coverage for your new living circumstances. Changing the type of insurance you need and figuring out the right coverage limits for your new home and belongings are two of the challenges that may apply to your homeowner's insurance.

Changing the Type of Insurance

If you're moving from one house to another house, you won't have to change the type of insurance coverage you're accustomed to. But suppose you're moving from a house to a condo, for example. In that case, you'll need to switch over to condo insurance, which is a different variety of insurance policy with some necessary coverages that you may not be as familiar with. It's not the end of the world to change insurance types, of course, but it pays to take the time to chat with your insurance broker and make sure you fully understand all the ins and outs of your new insurance policy.

Another example is if you're going from homeownership to renting, either temporarily or for a more extended period of time. While you don't need property insurance as a renter, it is necessary to have tenant insurance that covers your belongings so you can get them replaced in the event they are damaged, stolen or destroyed. Tenant insurance also provides liability coverage in the event that you accidentally cause property damage or bodily injury to others while at home or anywhere else in the world. Many landlords require their tenants to carry tenant insurance as part of their lease agreement.

Determining Necessary Coverage Limits

Because you'll have a different home and fewer belongings, you'll need to reassess your coverage limits to ensure you have enough coverage on your home insurance to get everything restored, rebuilt, and replaced as necessary but also that you're not paying for an excess of coverage that you really don't need.

If you already have a robust home inventory list for your current property, you can make the process simpler by adjusting the list to remove the items you're not bringing with you and add on anything new. But if you don't have a list, making one is a really good idea. It'll help you in multiple ways regarding your insurance, and not just for determining coverage limits. If you do have to make a claim, having the information readily on hand will make that process go much faster and easier, and that's always welcome during a stressful time like the aftermath of a house fire.

Once you start getting down to the nitty-gritty of which belongings you're willing to get rid of and which ones you absolutely need to keep, investing in off-site storage away from your new downsized home, such as a storage locker, is necessary. If that's the case, it's important to let your insurance broker know about your storage space and include your stored items in your insurance coverage.

5. What Type of Lifestyle Am I Most Interested In?

When it comes to choosing to downsize your home, one of the most significant considerations should be matching your home to the lifestyle you want to live. Moving allows you to begin a new era of your life and find a home that accommodates the lifestyle you've always wanted to live.

If you yearn to travel, for example or are interested in escaping Ontario winters in favour of a warmer climate for a good portion of the year, it could make a lot of sense to move to a condo where exterior maintenance and upkeep are taken care of for you year-round. That way, you can simply return to your Canadian home when you please, and it'll be ready and waiting for you without hassle. Or, maybe you're an avid gardener and can't wait to spend your free time after retirement puttering around in the backyard—in that case, it's obviously important to opt for a home with a suitable outdoor space.

Do you want to live in the same neighbourhood, town, or city where you live? Would you prefer to be closer to the excitement of urban life, or is a quiet, rural setting calling your name? Do you want to live closer to family and friends, or would a little distance suit you just fine? Do you need space indoors to indulge in a favourite hobby or display prized collections you've built up over many years?

Whatever you envision your life after downsizing your home, a relocation is the ideal opportunity to make sure you have the space and resources to make that vision a reality. Don't rush to choose a new place that is just a smaller version of the home you're leaving behind unless that's precisely what you want. You should really take the time to think about what you and the other members of your household want and need. You'll find the results of your move a lot more satisfying in the long run.

This content is written by our Morison Insurance team. All information posted is merely for educational and informational purposes. It is not intended as a substitute for professional advice. Should you decide to act upon any information in this article, you do so at your own risk. While the information on this website has been verified to the best of our abilities, we cannot guarantee that there are no mistakes or errors.

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