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Should I move to a smaller home?

If your goal is to reduce your housing costs, you need to do the math carefully before you move. For starters, smaller doesn't always mean cheaper. If you can believe it, the national median price for condos - which typically are smaller than stand-alone homes - is now higher than the median price for single-family houses.

Think long and hard before you downsize into a new place that requires you take on a big new mortgage. Even if it is affordable today, you need to consider whether you can pay that mortgage well into your 70s and 80s - bearing in mind what might happen to your finances when either you or your spouse dies.

One way to gauge affordability is to check out what the payments would be on a 15-year mortgage. If you can handle the higher payments on a loan that would be paid off before you retire, or early on in retirement, that can be a manageable debt load. But if the monthly mortgage cost on a 15-year scares you, that's a pretty good tipoff that you might want to look at less expensive homes. Don't let yourself off the hook by financing with a 30-year mortgage unless you are absolutely sure you have the savings to keep up with those payments well into your retirement years.

If you do decide to take the plunge, sell your current place before you buy the new one. Tempting as a pristine new condo can be in comparison to your drafty old five-bedroom Victorian, don't just plop down earnest money right away. Make sure that you have a buyer with solid financing. Otherwise, you could get stuck with two mortgages, two sets of property taxes, and - well, you get the idea.

At the very least, have your lawyer include a contingency clause in the sales agreement that obligates you to close on the new place only if you manage to sell your existing home by an agreed-upon date. In the sales frenzy of yesteryear, when sellers could make bidders do somersaults, they had no incentive to agree to such a clause. But in a market where homes are sitting on the market, sellers may show some mercy.

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