First Person: We Downsized Our Mortgage, but Not Our Home

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With the constant threat of layoffs and high costs of college for our sons, my husband and I could make the choice to downsize our home to save money. However, downsizing our mortgage instead of our home in our early 40s gave us the financial flexibility we needed. It also gave us the extra space we wanted for ourselves, our young adult children and aging parents. According to a recent CNBC piece, 40 percent of baby boomers plan to move within the next 5 years. Downsizing to a smaller home to save money is still as much of a trend with older empty-nesters as it ever was. Although Generation X was hit hard by the housing collapse, I think many of us benefited from the low refinancing options.

Paying less in less time

One of the great things about our new mortgage is the fact that we were able to lower our payment to about $900 with a 15-year term. If we had chosen the 30-year mortgage we could have downsized our mortgage even more to about $700 a month. We used to owe about $1222 every month. However, because I was so ambitious to pay down our mortgage, I'd pay $1,500 a month. We now spend $600 less on our mortgage each month.

Getting a low, low rate

I no longer feel the pressure to pay down my mortgage because we not only have a lower payment, but we also have one of the lowest mortgage rates on record of 2.75 percent. The average rate on my money market account is about 2.5 percent. I am able to take the extra money I used to put toward my mortgage and save it in a money market account. If we wanted to pay off our mortgage within the next 15 years, I may go to the money market for the remaining balance.

Saving on moving costs

Although we had to play closing costs to refinance our mortgage, we saved by not actually downsizing to a smaller house. Not only did we save on moving costs, but we saved on redecorating costs and new furniture. Since the home we live in is only 8 years old, we don't anticipate too many expenses. However, if we purchased another home all bets would be off. New homes in our area are expensive. The older homes have hidden costs because of all the renovation work that needs to be done.

Accommodating boomerang children

By remaining in our family home, we can accommodate our boomerang children as well as boomerang grandparents. Living in Florida, real estate is still fairy reasonable to buy for people who have full-time jobs. However, most people are working part-time jobs. Although it's cheap to buy, it's very expensive to rent. We like living in a 4-bedroom, 3-bathroom house because we have enough room for elderly relatives as well as young adult children who want to stay until they can save enough.

I'm glad we didn't downsize our home the minute our children went to college. At this stage in life, it's comforting to have a mortgage payment that is about $400 less than rent for a comparable place. By paying even just the minimum, we will be mortgage free in our 50s. We can then retire mortgage-free with a sizable money market account to tap for home improvements.

More from this contributor:

The Housing Recovery Flash is Over

Planning A Middle Class Breakout

Handling Money Like a Man


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