As we grow older, our housing needs and preferences often change/evolve.  The family home that once fulfilled all our needs and still holds a lifetime of memories may begin to feel impractical or burdensome as our family sizes and physical needs change.  This is where downsizing, “rightsizing,” or even a move to a more advantageous location is often the best alternative for many homeowners.

Downsizing refers to the process of moving from a larger residence to a smaller, more manageable one.  Rightsizing might not be less square footage but might be a home that is better suited for the owner’s needs (such as a single-story home instead of multiple levels or different lot characteristics).  And many older homeowners may want to move closer to needed services or family support.  For seniors, this transition can bring a multitude of benefits, both practical and emotional.  So we will use the term downsizing, but it will also include rightsizing for many homeowners.

In this article, we’ll explore 6 compelling reasons seniors might consider downsizing or rightsizing their homes.

1. Financial Freedom

One of the most significant advantages of downsizing is the potential for substantial financial gains.  Seniors can reduce or eliminate their mortgage by moving into a smaller home.  Additionally, smaller homes often have lower property taxes, reduced maintenance costs, and decreased utility bills.  The extra funds acquired through downsizing can be invested, used to support retirement, or even passed down to loved ones.

2. Simplify Daily Life

A larger home often means more space to clean and organize.  This can become a significant source of stress and physical strain for seniors.  Downsizing provides an opportunity to simplify daily life.  With fewer rooms and less square footage to manage, seniors can redirect their energy toward activities they genuinely enjoy.

3. Accessibility and Safety

As we age, mobility can become an issue.  Navigating stairs or managing a large property can become challenging or even unsafe.  Downsizing allows seniors to choose homes with features like single-story layouts, wider hallways, and accessible bathrooms, making it easier to move around independently.  Furthermore, downsizing can open opportunities for living in communities or complexes explicitly designed for seniors, providing additional amenities and safety measures.

4. Opportunity for a Fresh Start

Downsizing allows one to move to a location that better aligns with a senior’s needs and interests.  Whether it’s a vibrant city center, a peaceful countryside, or a lively senior community, it opens doors to new adventures and connections.

5. Peace of Mind for Loved Ones

Downsizing can provide peace of mind for both seniors and their families.  Knowing that a senior is in a space that is safe, manageable, and aligned with their current needs can be reassuring for everyone involved.

6. Opportunity to Move Closer to Family, Friends, or Needed Services

Downsizing allows you to move to a community near your family, dear friends, or doctors if you are not lucky enough to be close to them already.  Many senior communities now offer ride-sharing and other services that may be handy for shopping and doctor appointments. 

In conclusion, downsizing offers a range of benefits for seniors, from financial freedom to enhanced well-being and community engagement.  It’s a positive step towards creating a living situation that supports and enhances this important phase of life.

Utilizing a Reverse Mortgage to downsize

When considering a downsize, finances undoubtedly stand as the foremost concern.  One must consider the equity position in the current residence and how much you will receive from the sale transaction after the costs of selling a home and moving. 

For some, the equity position in their current home is substantial enough to cover the move and purchase of the new home without the need for any financing or cash out of pocket.  However, for most, that may not be the case.  A reverse mortgage for purchase could be the perfect loan option for a senior looking to downsize when their current home equity will not be enough to obtain their new home.

Unlike a traditional mortgage, a reverse mortgage loan requires no monthly mortgage payment.  This allows a senior borrower to borrow a percentage of the purchase price to combine with their available funds to increase their purchasing power to get the home they truly want or need without adding additional expenses to their monthly budget in the form of a mandatory mortgage payment.  And in some cases, it allows them to eliminate a current mortgage at the same time.

Additionally, due to the lack of a mandatory payment, many senior borrowers will opt to obtain a reverse mortgage even when they have sufficient funds from selling their current home.  This is because it allows them to preserve more of their savings to invest, supplement income, or use for other purposes such as healthcare, travel, or leisure activities. 

Let’s look at a couple of examples of how you can utilize a reverse mortgage to downsize/rightsize closer to your family.

Purchase Downsize Case Study 

• Desires to move closer to family, lower-maintenance single-level home (Estimated Sales Price $500,000)
• Currently owns a home valued at $1,250,000
• Existing mortgage balance of $300,000
• Mortgage payment of $1,500 (principal & interest)

Mary will net $875,000 in available cash after the home sale.  This NET amount includes the average cost of selling your home (6% listing fees) and her $300,000 mortgage balance payoff.

Option #1 – Pay Cash

• Mary buys a house for $500,000 with cash.
• She’ll still have $375,000 left.
• By not having a mortgage and investing her $375,000, Mary would effectively see an extra +/- $36,000 per year between her income on the money and not having to pay a mortgage payment.

Option #2 – Use Reverse Mortgage 

• Mary puts down $298,240 and uses a reverse mortgage for the rest.
• She’ll have $576,760 left over.
• By not having a regular mortgage and investing her $576,760, her additional cash flow might be closer to +/- $46,838 yearly.

Mary’s Purchase Illustration – Assumes 5% return on remaining investable assets. (Not financial advice; Speak to your trusted financial professional.)

Purchase Rightsize Case Study

• Desires to move to an active adult community 55+ (Estimated Sales Price $600,000)
• Currently owns a home valued at $500,000
• Existing mortgage balance of $0

 Ron will net $470,000 in available cash after the home sale.  This NET amount includes the average home selling cost (6% listing fees).

Option #1 – Mix of Cash and Mortgage

• Ron buys a $600,000 house.
• He uses his sale money and borrows $130,000.
• This loan means he’ll pay $864 every month for 30 years.

Option #2 – Use Reverse Mortgage

• Ron puts down $371,856 using a reverse mortgage.
• He’ll still have $98,144 left.
• He won’t have any monthly mortgage payments.
• If he invests his $98,144, he can earn $15,275 extra each year.
• Ron has no monthly mortgage payments.

Ron’s Purchase Illustration – Assumes 5% return on remaining investable assets. (Not financial advice; Speak to your trusted financial professional.)

And the Best Thing Is…

The best thing about both examples is that both Mary and Ron can achieve their goal of moving to a home that better suits their needs in their chosen location.  Mary has the equity to do it either way but may only want to use some of her funds to pay cash.  Ron doesn’t have the equity to pay cash and doesn’t want to start paying a mortgage again, so he thought he was destined to stay in the home forever, even though it no longer met his needs.  Mary gets to move closer to her family in a one-story home.  Ron, an active guy who loves the amenities the senior community offers, also wins with his anticipated move.  

Is downsizing or rightsizing a good plan for you or your loved one?

Use our free purchase calculator to see how a reverse mortgage can increase your annual cash flow. 

ARLO also recommends: 

• Purchase Reverse Mortgage Purchase FAQs
• Here’s an Ideal Reverse Mortgage Purchase Example