Downsizing Calculator

Enter your current home's value, mortgage, and monthly cost, plus the smaller home you'd buy. You'll see the equity a move would free up, the monthly savings, and when the move pays for its own transaction costs.

Your current home:

The smaller place:

Transaction costs:

Put this calculator on your website — free

Copy one snippet and give your visitors a working Downsizing Calculator.

How the downsizing comparison works

Selling and buying smaller does two separate things for you, and this calculator keeps them separate. First, it frees equity: your sale proceeds (after selling costs and the mortgage payoff) minus everything the new place costs to buy. That's capital that was locked in drywall and is now investable — the table shows what it could pay you at a modest 4% a year (see the retirement withdrawal calculator for how long portfolio money lasts at different rates). Second, it lowers your monthly burn: a smaller place usually means smaller taxes, insurance, utilities, and upkeep, and that delta arrives every single month, forever.

Against both stands the one-time transaction hit — roughly 10% of the combined prices once you sell at ~7% and buy at ~3% (price the pieces with the closing cost calculator and the moving cost estimator, which this tool's percentages don't include). The 10-year chart plots cumulative cost of each path, with the moving path starting in a hole the size of those costs. Where the lines cross is the honest answer to "when does this pay off?"

The formula

proceeds = value × (1 − sell%) − mortgage    freed = proceeds − price × (1 + buy%)

Value and mortgage describe the home you'd sell; price is the smaller home; sell% and buy% are the transaction costs on each end. The monthly delta is simply your current monthly ownership cost minus the new one, and the payback point is the total transaction cost divided by that delta.

Worked example

Sell a $650,000 home with $180,000 left on the mortgage ($3,400/month all-in); buy at $350,000 ($1,700/month), selling costs 7%, buying costs 3%.

Proceeds: $650,000 × 0.93 − $180,000 = $424,500. Cash to buy: $350,000 × 1.03 = $360,500. Equity freed: $64,000. Monthly delta: $1,700 lighter — $20,400 a year of breathing room, plus about $2,560/year if the freed $64,000 earns 4%.

The transaction costs total $45,500 + $10,500 = $56,000. At $1,700/month saved, the move pays for itself in month 33 — from year 3 onward, every month is pure gain.

The taxes, the round trip, and the rent option

Good news first: for most downsizers the sale is tax-free. Section 121 excludes up to $250,000 of gain ($500,000 married filing jointly) on a primary residence you've owned and lived in for 2 of the last 5 years. Long-time owners in appreciated markets can blow past that — a house bought for $120,000 in 1995 and sold for $800,000 has gain beyond the couple's exclusion — so run the capital gains tax calculator before you spend the proceeds on paper. And respect the round trip: nearly 10% of these large numbers evaporates in commissions and closing costs, which is exactly why the monthly delta needs to be real, not hopeful. If you might move again within a few years, consider renting instead — enter 0 as the purchase price above to model it; you free the entire proceeds and buy flexibility, at the cost of rent inflation and no equity.

What the calculator can't price

A house is also the stairs your knees have opinions about, the neighbors who collect your mail, the room where your kids' heights are penciled on the doorframe, and the guest beds that make holidays possible. None of that appears in the table above, and all of it belongs in the decision. Some of it argues for moving — single-level living, less to maintain, closer to family — and some argues for staying, and only you know which. This calculator can price the house. It can't price the home. Get the numbers right here, then weigh the rest without guilt in either direction.

Frequently asked questions

How much money will I free up by downsizing?

Net sale proceeds (your home's value minus selling costs and the mortgage payoff) minus the full cost of the new place (price plus buying closing costs). On a typical move — say a $650,000 home with $180,000 left on the mortgage, downsizing to $350,000 — that's roughly $64,000 freed after all transaction costs, plus whatever the monthly cost difference saves you every month thereafter. Run your own numbers above; the transaction costs move the answer more than people expect.

What does it cost to sell a house?

Plan on roughly 6-8% of the sale price: agent commissions (typically 5-6%, sometimes less since commission rules loosened) plus seller closing costs, transfer taxes, and the usual pre-sale repairs and concessions. Add 2-4% in closing costs on the home you buy and the round trip runs near 10% — which is why a downsizing move needs a real monthly saving or a big chunk of freed equity to justify itself.

Do I pay capital gains tax when I downsize?

Often not. Section 121 of the tax code excludes up to $250,000 of gain ($500,000 for married couples filing jointly) on the sale of a primary residence you've owned and lived in for at least 2 of the last 5 years. Gains beyond the exclusion are taxable, which catches long-time owners in appreciated markets — estimate the damage with our capital gains tax calculator before you count the proceeds.

When does downsizing pay off financially?

When the monthly savings have repaid the one-time transaction costs — that's the crossover the 10-year chart shows. Selling at 7% and buying at 3% on the example above costs $56,000 up front; at $1,700/month saved, the move pays for itself in month 33. A move with little or no monthly saving may still make sense for the freed equity or the right-sized life, but it never 'pays for itself' on cash flow alone.

Should I rent instead of buying smaller?

Renting frees your entire net proceeds instead of parking most of them in another house, and it buys flexibility — worth a lot if you might relocate near family or into different care needs within a few years. The trade is rent inflation and no equity growth. Enter 0 as the new home price above and your expected rent as the new monthly cost to see that version of the move.

Related calculators