The old adage of "bigger is better" is completely passé now. If you want to be on the forefront of what’s hot in today’s world, don’t think big; think small! It’s all the rage in nearly every industry—mobile phones, music players, fashion (mini skirts and slim jeans!), and cars. And guess what? That trend is also big in real estate. While it used to be empty-nesters and retirees who were most likely to downsize their home, more and more growing families are joining the "smaller is better" revolution when it comes to their choice of home. Why? They want a better quality of life now, while they’re young enough to enjoy it.
Though there are many benefits of downsizing a home—decreased utility costs, less expensive home maintenance, and cheaper property taxes, for example—the biggest benefit of downsizing a home is the money saved on mortgage payment. I know what you’re thinking: If you buy a smaller home, you’ll be cramped. Well, consider this: If you’re like most Americans, 45% - 55% of your income is dedicated to your mortgage payment and mortgage-related / homeowner-related expenses. When you consider your other financial responsibilities
, that doesn’t leave very much disposable income to just enjoy life! Going smaller, however, definitely makes more room in your budget, which means you can spend more time outside of your home exploring the world! Let’s look at an example:
The average preferred size home in America today is 2,500 square feet. Now, let’s say that the price tag for a home that size is about $240,000. With a 20% mortgage down payment and a mortgage rates of about 5.33%, the mortgage payment would be $1,225.77 / mo. Now, if we compare that to a 1,500 square foot home priced at $175,000 and a 20% mortgage down payment, the mortgage payment would dip to $780.04 / mo. That’s a decrease of $445.73 in your mortgage payment. Over the course of one year, that’s a mortgage savings of $5,348.76! Plus, you’d save about $40 for every $100 of utilities every month, which is another $480! That’s nearly $6,000 annually. How much more living could you do with that kind of savings each year?
Now, for those of you who really want to super-size your mortgage savings by downsizing, you’re going to need to hunt for a special kind of home: A Small House. These types of homes, which are designed by specialty builders like Tumbleweed Homes, provide the ultimate in mortgage savings.
Small Houses are cozy cottages that take economizing living space to the extreme; on average, they range from 80 square feet to less than 1,000 square feet! Of course, opting for a small house will take some getting used to for most Americans; there’s room for luxuries but not non-necessities. However, if you can make the transition, it will certainly pay off in the long run. The tiniest of Small Houses can be purchased / built for about $25,000 and the larger Small Houses—even those built with top-notch fixtures and building materials—typically have a price tag of less than $70,000! Therefore, a mortgage payment at 5.33% for a 30-year mortgage would be just $390.02 / month! That’s an 835.75 monthly savings on your mortgage payment if you downsized from a 2,500 square foot house, which equates to savings of $10,029 per year! Now how’s that for a manageable mortgage payment, and an affordable way to live big by thinking small?
