BACKNEXT

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. If you’re in a slower real estate market, the seller might agree to such a clause. You may have less luck in hot real estate markets, but you may also have an easier time selling your home.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.