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Points to consider before downsizing to a new home

On Behalf of | Jun 28, 2018 | Bankruptcy

For Tennessee residents facing major debt problems, losing their home is a prime concern. After all, a house is one of the most expensive, but essential, assets in life.

This leads many homeowners to consider selling their house in favor of either a cheaper property or an apartment. However, the numbers might not always match up. Homeowners need to weigh this decision very carefully to avoid plummeting further into financial turmoil.

Moving isn’t cheap. Even if the new home is more affordable per month, you should prepare to face the costs of hiring a truck and movers if necessary. Deposits, in-between housing, closing fees and unforeseen expenses can add up quickly. This forces a buyer to need cash or loans up-front, which can be extremely difficult to secure if you’re already strained.

If you plan to switch to an apartment, the monthly payments might be cheaper than those of your current home. However, apartments don’t provide equity once you recover from this downturn. There is no definitive answer on whether it’s better to rent or continue owning; it greatly depends on your ability to meet current payments and how much you could save in the short-term.

Downsizing often means reducing square footage. Smaller spaces have both benefits and drawbacks. On one hand, you wouldn’t need to furnish as many rooms. Selling extra furniture can boost cash reserves. On the other hand, large families might suffer stress from overcrowding.

Downsizing isn’t always enough to balance household debts and expenses. In some cases, filing bankruptcy can be a great move to prevent foreclosure. Mortgages can be highly expensive, but this option could reduce monthly house payments to manageable amounts.