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5 Reasons You May Not Want to Downsize in Retirement

With rising mortgage rates, staying put may make more sense

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Downsizing your home in retirement can free up cash and lessen the burden of managing a large abode. But there are also reasons you may want to stay put, particularly with mortgage rates rising and inflation soaring.

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“A lot of people who are staying in their home already have low mortgage payments and interest rates,” says Linda McCoy, president of the National Association of Mortgage Brokers. “If they do it right now, they are paying more to downsize from the house they’re living in.”

Home prices are also soaring. As of May, they are up 14.8 percent year-over-year, with the median existing-home sales price of $407,600 surpassing $400,000 for the first time, according to the National Association of Realtors. Even if retirees don’t mind the higher interest rate, they’ll have to pay more to downsize than before the pandemic.

Home affordability is a big reason not to sell, but it’s not the only one. Here are five others: ​

1. There’s no place to go.​

For retirees looking to swap out a big home for a smaller one, there aren’t endless choices. Inventory is tight and properties are expensive. The viable ones may be out of their price range. With nowhere to go, some retirees are opting to stay put. “Prices are up and you can list houses for probably $100,000 or $200,000 more than you could two years ago, but what are you going to get?” says Carolyn Morganbesser, assistant vice president of mortgage originations at Affinity Federal Credit Union. “Let’s say you are lucky enough to find something. How much are you going to spend?”​

2. You can afford to stay put.​

For some retirees, downsizing is a way to free up cash to live off of. But if you can afford to maintain your existing home and are in good health, downscaling doesn’t have to be a foregone conclusion. You can wait it out until the market improves or age in place in a community you’re used to. “If they are comfortable mentally, physically and financially, they may stay put,” says Kent Pearce, managing director and senior financial adviser with Merrill Lynch Wealth Management.

3. Your adult kids are moving back in.

​It makes sense for empty nesters to downsize, but if the COVID-19 pandemic taught us anything it’s that your adult kids might not be gone forever. Even before the pandemic, many kids were returning home. What better reason not to move than that? “The three variables not to downsize are location, family and accommodations,” Pearce says. “We’re seeing a lot more of the younger generation moving back in after college until they get situated.”  

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4. You want to put your equity to work.

​Selling your home isn’t the only way to free up cash. In a tight real estate market with rising mortgage rates, a home equity line of credit, or HELOC, is another option. It’s a low-cost way to access equity without selling your home.  

5. You prefer to age in place.​

Despite all the talk of downsizing, there’s a large group of older adults who want to age in place. They like their home, the location, the community and their way of life. They simply have little reason to move. In responses to AARP’s 2021 Home and Community Preferences Survey, about three-quarters of adults 50 and older said they want to stay in their current homes or communities for as long as possible. What’s more, 69 percent would be open to sharing their home with a relative (other than a spouse) and 54 percent with a friend as they age.

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