Costs to consider when downsizing

Downsizing typically involves two cost stacks: expenses to exit your current home, such as repairs, a real estate commission and seller closing costs, and expenses to enter the new one, such as closing costs, moving expenses, accessibility upgrades and possible HOA fees.

People downsize for a variety of reasons, whether it's changes in lifestyle or budget, the kids moving out or moving closer to family in a new city. Whatever is driving the decision, the financial side of downsizing deserves the same consideration as the emotional one.

On paper, downsizing looks simple: sell a bigger home, buy a smaller one and pocket the difference. In practice, that difference shrinks before it ever reaches your bank account, often due to repairs, commissions, or an HOA fee you didn't plan for.

Going in with the full financial picture turns downsizing from a rough guess into a decision based on real numbers.

What it costs to sell your current home

When you decide to downsize, selling your current home comes first, and the various costs start well before you list.

Pre-listing preparation, repairs and seller closing costs

Before your home hits the market, plan to spend on:

• Cosmetic updates: Paint, landscaping and minor repairs help the home show well, and can cost a few hundred dollars to several thousand, depending on the condition.
• Professional staging: Most homeowners spend around $1,849 for a staging package, but you may have to pay more for larger homes or if you're staging while still living there.
• Seller closing costs: Transfer taxes, title fees, recording fees and attorney costs typically add 2% to 7% of the sale price, on top of commission.

Any mortgage balance you still owe gets paid off at closing, which cuts into your proceeds. Property tax prorations and other prepaid items chip away at the total as well.

Real estate commissions

Commissions, split between the listing agent and buyer's agent, are usually the highest cost of selling. As of 2026, the national average commission is 5.70% of the sale price, which is a five-year high. On a $400,000 home, that's about $22,800 off the top, before any other closing costs.

Sellers no longer have to automatically cover the buyer's agent fee, but many still offer a concession to attract buyers. Commissions are negotiable, and flat-fee or low-commission brokerages are easy to find if you want to shop around.

Moving costs and the tax picture

According to Angi, moving costs can vary widely, especially if you’re going long-distance:

• Local move: $876 to $2,550
• Long-distance move: $2,700 to $10,000 or more

One way to bring that number down is to downsize your stuff before the move, not after. Selling, donating or gifting furniture you won't need in a smaller space cuts your moving bill and can save you from paying for storage, which typically runs $900 to $1,800 a year.

Fortunately, selling your home also comes with a tax break. Under current IRS rules, as long as you've owned and lived in the home for at least two of the last five years, you can exclude:

• $250,000 of capital gains if you're single
• $500,000 if you're married filing jointly

Gains above those thresholds are taxed at long-term capital gains rates of 0%, 15%, or 20%, depending on your income. Please consult a tax advisor regarding your specific tax situation.

Costs to buy your next home

Selling is only half the equation. What you spend to move into your new place affects the math just as much, starting with the home buying process itself.

Purchase closing costs and accessibility modifications

Buyer closing costs typically run 2% to 5% of the purchase price. These cover:

• Mortgage origination fees, if you're financing
• Appraisal
• Title search and title insurance
• Recording fees
• Prepaid property taxes and homeowners insurance

On a $300,000 purchase, that's $6,000 to $15,000 due at closing, on top of your down payment.

Keep in mind that a smaller home isn't automatically an easier one to live in. Many downsizing buyers find their new place needs work to fit their needs long-term. According to Angi's cost data, these are some of the most overlooked costs of downsizing later in life:

• Doorway widening: $800 to $2,500 per door
• Walk-in shower conversion: $6,000 to $12,000
• Full accessible bathroom remodel: averages $8,400, up to $16,000
• Whole-home accessibility retrofit: can run as high as $75,000

Ongoing costs in the new community

While many costs are one-time occurrences, others repeat every month or every year, and they're what most often catch downsizing homeowners off guard:

• Homeowners association (HOA) and condo fees: The national median for HOA fees is $135 a month, but condo and amenity-heavy buildings often run well above that: state averages top $800 a month in high-cost markets like New York.
• Special assessments: If an association's reserves fall short on a big repair (such as a new roof, elevator work or storm damage), it can bill owners a special assessment that adds hundreds or thousands of dollars to a single month's bill.
• Property tax resets: Long-term owners often get a frozen or capped tax assessment. That protection doesn't carry over when you sell. Your new home gets assessed at today's market value, which can mean a higher tax bill, even if the home itself costs less.
• Homeowners insurance: Rates vary a lot by location. Moving somewhere with hurricane or flood risk can mean a much higher premium than you're used to.
• A different cost of living: Groceries, dining out, utilities and everyday services can cost noticeably more (or less) in a new city or state. It's worth building a real budget for your new area, rather than assuming it'll be the same as at your current home.

How to budget for your home downsize

The best way to know if downsizing pencils out is to run the actual numbers before you commit to anything.

1. Get a seller's net sheet. Ask your agent for a formal estimate: proceeds after commission, closing costs and any mortgage payoff.
2. Get a tax estimate before you list. A CPA or tax advisor can tell you if your gain will pass the Section 121 exclusion, and what you'd owe if it does.
3. Research the new community's full cost stack. Before you commit, ask for a year of HOA financial statements, the reserve fund balance and the special assessment history.
4. Revisit your mortgage structure. A large down payment or an all-cash purchase locks your cash inside the house right when moving costs, accessibility upgrades or an HOA special assessment are most likely to hit. Talk to a loan officer about financing or refinancing with your full financial picture in mind, not just the purchase price.

Downsizing done right

A large-equity, no-mortgage home ties up your cash in the walls of the house. If a special assessment, a bathroom remodel or a bigger insurance bill shows up right after you move in, that equity isn't there to help unless you sell or borrow against it. A mortgage structured around your full financial picture, not just this one purchase, can do more for your retirement plan than paying cash outright.

A successful downsize means planning the whole transition, sale and purchase to strengthen your financial position for what's next. Connect with a Citizens mortgage loan officer to discuss how financing fits your downsizing plan.

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Frequently asked questions

How much does it typically cost to downsize your home?

Costs vary, but plan for commissions and closing costs near 8% to 10% of your sale price. Add a few thousand dollars for moving, staging and any accessibility upgrades. Run the numbers for your specific situation before you list.

Will I owe capital gains taxes when I sell my home to downsize?

Maybe, but many homeowners won't owe any capital gains taxes. If you've owned and lived in the home for at least two of the last five years, you may be able to exclude up to $250,000 of gain ($500,000 if married filing jointly). Gains above that amount are generally taxed at long-term capital gains rates. Because tax situations vary, please consult a qualified tax advisor for guidance specific to your circumstances.

Should I pay cash for a smaller home or take out a mortgage when downsizing?

It depends on your full financial picture. Cash eliminates a monthly payment, but it also ties up money you might want liquid for emergencies, health care or other goals. A loan officer can help you weigh both paths against your retirement plan.