When we bought our first home, we bought more than we needed. Having lived in apartments the previous 10 years, we thought that it would be nice to have some room to spread out in and stretch our legs a bit. We also thought that with a new baby and thoughts of another, that the extra space would provide us the opportunity to expand our family if needed.
However, what that first home ownership experience taught us was that we don't need nearly as much space as we thought we did, and the costs that came with that larger home were a real eye opener. Therefore, when we sold that home and began searching for our next, we did so looking at properties that were below our means.
Ability to Buy Outright
With our first home, while we were able to put a substantial amount down, we still had to take out a sizeable mortgage. And at a 5.735 percent interest rate, we ended up paying quite a bit in interest on our mortgage. However, by downsizing to a smaller home that was half the price of that first home, we were able to afford the property outright. In the process, by paying cash rather than putting 20 percent on a 30-year fixed rate mortgage, we've saved ourselves in the area of $85,000 in interest. Plus, we avoided all the costs involved with applying for a mortgage as well.
Lower Property Taxes
In our area, a smaller home equates to lower property taxes. By downsizing and taking on a place that is about half the size of our first home, we ended up reducing our property tax burden by almost $2,000 a year. This might not seem like a lot, but it can add up over the years.
Fewer Upkeep Costs
We're finding that a smaller home comes with fewer things to fix, and in turn, this equates to lower maintenance and repair costs. We've been able to cut about $100 a month of our regular repair and upkeep costs so far, and our smaller space comes with a lot less time and stress spend on repairs and updates.
A smaller home also means lower utilities. In our first home, we had three floors and over 2,000 square feet of space to heat and cool. In our current, smaller home, we have less than 1,000 square feet of space to deal with on a single floor. This has allowed us to cut our utilities by over $100 a month as well as stay much more comfortable than we were in our larger home when it comes to temperature.
With less space, we have less to furnish, and in turn, need less furniture and home furnishings in general. This of course saves us money, but our lack of space pays off in other ways too. Not only do we accumulate less "junk", but we're continually looking for ways to downsize our stuff, which leaves us re-evaluating whether certain items are necessary, and if not, getting rid of them either through resale or donation. This provides us with additional savings by way of not buying as much stuff, and then provides us with extra income when we find ourselves selling unwanted or unneeded possessions through resale stores, consignment shops or garage sales.
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The author is not a licensed financial or real estate professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or real estate advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
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