You might want to downsize your home for various reasons. Maybe your children are now adults, or you’re close to retirement, or you simply just want to save money. Whatever the reason might be, financial guru and podcast host Dave Ramsey said that while doing so might initially feel like a step down, “a closer look reveals quite a few upsides.”
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“Saving money, saving time and having less clutter in your life. Downsizing could be just the fresh start you and your family need!,” he argued in an article.
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Lower Your Mortgage Payment and ‘Attack your Debt Snowball’
With a lower mortgage, you can use that freed money toward paying your debt.
“Let’s say you owe $18,000 on your student loan. With a 6% interest rate and a minimum payment of $200 a month, you’ll be paying on that loan for 10 more years!” wrote Ramsey.
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Boost Your Retirement Fund
Once you’re debt-free, it’s time to build wealth for the future, argued Ramsey. He recommended investing 15% of your household income into Roth IRAs and pretax-retirement plans.
“If you’re still working your way up to 15%, that extra $500 could be the push you need to get there. And, boy, the difference $500 could make!” he wrote.
A third financial benefit to downsizing is that you can use that extra money to trade in your mortgage for a paid-off home.
“Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down!” argued Ramsey.
Additional Financial Advantages of Downsizing Your Home
As Experian explained, downsizing also translates into lower utility bills. So can eliminating a yard and lawn, which can significantly lower water bills.
In addition, a smaller house will also generally cost less to insure, according to Experian.
Finally, it could also lower your tax bill.
“Because square footage is a factor in assessing a home’s value for tax purposes, property taxes are generally lower for smaller homes,” according to Experian, which noted that it could be wise to consider moving to a state with lower or no income taxes, property taxes and sales taxes.
“Florida and Nevada are popular choices for downsizing retirees partly because neither has state income tax,” Experian pointed out.
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This article originally appeared on GOBankingRates.com: Dave Ramsey: 3 Financial Benefits of Downsizing Your Home
