Financial Planning
How Much Money Do You Actually Save by Downsizing?
A worked example with real line items — what comes off the monthly budget, what closing costs take, and what's left.
By Lisa Copeland · 6 min read
Take a common case: a $780,000 family home, no mortgage, replaced by a $420,000 single-story with modest HOA dues.
The old home costs roughly $1,050 in taxes, $290 in insurance, $410 in utilities, $260 in lawn and pool care, and a $650 monthly maintenance reserve — about $2,660 a month.
The new home costs roughly $560 in taxes, $170 in insurance, $220 in utilities, $210 in HOA dues, and a $350 reserve — about $1,510 a month. That is $1,150 a month recovered before any equity moves.
On the sale, subtract about seven percent for commissions, closing, and the move — roughly $54,600 — and the $420,000 purchase. Around $305,000 is released.
Drawn conservatively at four percent, that equity produces about $1,017 a month. Combined with the savings, the household gains roughly $2,167 a month, or $26,000 a year, without earning another dollar.
Change the inputs and the answer changes, but the structure never does: savings plus a conservative draw equals freedom income. Run your own version before deciding anything.