Personal Finance

I'm 46 with a $3 million house looking to trade down and buy something in the $1.5 million range - is this a smart move?

Maurie Backman

Published: January 21, 2025 9:41 am

A lot of people look to downsize their homes once retirement gets close, or once their children have moved out and they no longer need so much space. But you don’t have to be older for downsizing to make sense.

In this Reddit post, a 46-year-old man is wondering if he should trade down out of his $3 million home. He’s no longer with his partner, though he does have a child.

He could easily take the proceeds of the sale of his house and use them to buy a $1.5 million home in cash. But should he? Let’s dig in.

The benefits of unloading an expensive house

The more expensive a house is, the more it usually costs to live in it. A $3 million home likely comes with higher property taxes, insurance premiums, and maintenance costs than a home that costs half as much. So even if the poster above can afford a $3 million home, I’d say that there’s a big benefit to getting out of that expensive property and buying a more modest one.

Granted, the poster here also has a $7 million liquid net worth. So they’re not exactly hurting for money.

But they also don’t know what other expenses might come up, or what needs they might have in the future. So if they feel that downsizing could free up a nice amount of cash to put toward other goals, and they’re not particularly attached to their $3 million house, then it pays to move. It may also be that they have some bad memories there as the home they shared with a former partner, so that’s a consideration, too.

On the other hand, moving homes could mean having to pull their child out of their current school district, or uproot their child and force them to get used to new surroundings. If that’s an issue, then that’s a good reason to stay in the home, since it’s clear the poster here can afford to keep it.

Always look at the big picture

You may be in a position where you’re thinking of downsizing out of a larger home and into a smaller one. And you may not have nearly the same net worth as the poster above.

But my advice is essentially the same. If you’re contemplating downsizing, consider the pros and cons.

The benefits include freeing up cash you can put toward other goals, like boosting your retirement savings or your child’s college fund. The downsize is having to move and deal with the repercussions of leaving your neighborhood, which could be a tougher thing if there are kids in the mix.

One thing you may want to do either way is sit down with a financial advisor and ask their opinion based on your total financial picture. If you’re behind on retirement savings, they might advise you to unload a more expensive home and replace it with a cheaper one — especially if you have enough equity in your home to buy another one outright with cash.

Right now, mortgage rates are hovering around 7%, so it’s not the best time to sign a home loan from an interest rate perspective. But if you have enough equity to buy a replacement home in cash, that’s not a concern.

And even if you do need to sign a mortgage in the course of downsizing, today’s rates won’t last forever. You might be able to lower your payments with a refinance in a few years. So don’t let the idea of signing a mortgage in today’s borrowing environment stop you from downsizing if it’s the right move for your finances and lifestyle on a whole.