Opportunities exist for a subset of homeowners, possibly in their 60’s to 70’s, who want to downsize to smaller homes for convenience, less maintenance, change of lifestyle, or to save money. These homeowners are more likely to have large equities and will not feel the same constraints that are keeping younger owners in their homes due to the substantial increase in mortgage rates in the past year.
In some cases, there may be enough equity in their relinquished home to pay cash for the replacement. In other situations, the loan-to-value may be so low that even with higher mortgage rates, it won’t be as expensive as purchasing with a minimum down payment.
Some downsizers may be moving from a high-cost area to a lower-cost area where they can get more home for the dollar and may even be able to free up cash for investment or special projects.
It is more likely that older homeowners are living in a property above the median price. If a seller has a $750,000 home with no mortgage and they’re wanting to downsize to a $400,000 home, 7% mortgage rates are probably no concern at all because they’re going to pay cash. In a situation like that, even considering sales costs on the relinquished home and acquisition costs on the replacement home, there will be cash proceeds available.
If you’re considering downsizing, or possibly, have parents in this situation, feel confident that you have different options than first-time buyers. Your equity and the fact that you’re buying a smaller home can help you achieve your objectives even in a volatile market.
Let’s connect and explore the different options that are available!