The amount of people downsizing to smaller homes is adding even greater pressure to property prices as empty-nesters and households under financial stress compete with younger families and investors for homes in the popular middle-price ranges.
Job losses, family separations, the global financial crisis and lifestyle changes are some of the main reasons people are downsizing. However, increasing demand from these buyers is pushing prices up, wiping out much of the expected savings. Empty-nesters and retirees, in particular, are often now faced with little or no extra cash left over after they sell the family home and downsize.
Then why downsize?
Downsizing your home & mortgage is generally a good idea, but it only works if the new property gives both the kind of swap in lifestyle and finances a person is looking for.
Downsizing your home is most commonly associated with empty-nesters and retirees looking for smaller spaces after the children have grown and moved out. However downsizing has also become a popular move for a growing number of homeowners as it makes a lot of financial sense. Families are buying smaller homes to reduce their debt – by selling up and buying a smaller and less expensive property, they can reduce their mortgage and create a comfort zone.
Downsize to reduce mortgage repayments
The monthly mortgage payment is generally the largest single expense consumers face. It often accounts for 30% or more of an average gross income, which accounts for 50% of net income. Downsizing your home can have a dramatic effect on your mortgage repayments. At the very least, it can result in a significant reduction in your monthly expenditure, a significant increase in your cash flow and massive savings in interest over the term of your mortgage.
When you downsizing into a smaller home, you will naturally incur reduced expenses, such as a lower heating bill (as there obviously is less space to heat) – and this is just one of the savings opportunities that will become available to you. Consider this – if by downsizing your home you are able to save $600 per month, that turns in to $7,200 per year, which is a massive saving of $72,000 over the course of a decade. Think of what you could do with that money in ten years: take a well deserved overseas holiday, pay for your children’s weddings or tertiary education, or perhaps even invest it into another property.
To learn how the Australian Lending Centre can assist you to decrease your mortgage repayments simply fill in the enquiry form to your right or call now on 1300 138 188 to speak with a loan consultant today.