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My wife and I downsized for the same reason about 5 years ago with young kids.
My advice is to make sure you and your spouse are 100% on the same page. My wife agreed we needed to downsize but I pushed for a bit less in house and she bit her tongue. 4 months in, she hated the house and we ultimately renovated the master bath and kitchen to try to improve. We moved again after 2 stressful years.
Financially, we still made money on the situation but only because it was during prolonged hot market. If it was a flat or normal market, we probably would have lost money considering transaction costs.
FWIW I am in a similar situation and am going with the cheaper $750k option on my end. I prefer to spend on my happiness as another poster indicated, and I want breathing room if everything goes south for some reason.
I don’t know, I understand the stresses, but hate the thought of losing all the transaction costs…I’ve considered the same thing and ultimately I will never let go of my current primary, even tho I don’t love it, and could be happy with less. Downgrading is likely going to cost you around 100k in transaction costs unless you can cut your agent commission (and other costs). You might also be buying into a much worse interest rate. Depending on your market dynamics, it could make sense to rent your house out, then rent out something less expensive. No transaction cost. Just a thought.
What would be the upside of paying off the mortgage? After the smaller mortgage is paid off, what would you do with the cash flow? Would you invest in market, real estate, or something else? Are you concerned that the higher value home would not appreciate sufficiently? Of course, with higher value homes come higher utility, insurance, and upkeep costs.
Not challenging, just curious. It would help to answer these questions to get a better response.
Sounds like you have your answer. Only you know you. 😄
It sounds like your current jumbo mortgage is north of 1m. If you can downsize to a 600k house that is a no brainer. You’ll get use to living in any reasonable house. There’s a good mba class I took that discusses this in one of the cases. Use the excess money you would have spent on the 1.5m house to “buy happiness” in other ways. The professor says the net happiness is higher doing so, than spending more money on a home
Yeah, that’s basically my thinking. I’d love to have the sense of financial security and I know I’d get used to the house/neighborhood. Realistically we’d probably have to go a little higher than 600k, but either way it would be cheaper and less stressful than having a mortgage over 1m.
We considered it. When we were house hunting, our range was $700k-$2.2k. Ultimately, the smaller homes in this area had their own issues. Smaller property closer to neighbors, often needed more work, and a much smaller kitchen.
We spend nearly all our time in 1 bedroom, 1 bathroom, the kitchen, the great room and my office. By square footage, that's probably a third the house, maybe a quarter. But we couldn't get that kitchen, that great room, and that yard without a house this size.
It's all moot now. Our jumbo mortgage for a $1.5M house is now about the same monthly payment as a regular mortgage on a $850k house.
I will downsize after my kids have moved out. In the current market, it is likely that you have a low mortgage rate, unless you have a lot of equity in your house and you can use the equity to pay for the smaller house w/o needing another mortgage, then it could make sense. Otherwise, like SVP1 mentioned above, a cheaper house with a higher rate is like an expensive house with a low rate.