Does Downsizing Actually Save Money? The Math Homeowners Should Do First

Here's an assumption I hear all the time:

"We'll sell the big house, buy something smaller and pocket the difference."

Sometimes that's exactly what happens.

And sometimes it doesn't work out that way at all.

A smaller home doesn't automatically mean a cheaper home.

A paid-off house doesn't automatically mean a big check at closing.

And a lower price tag doesn't automatically mean lower monthly costs.

If you've read the 10 signs it might be time to downsize and you're nodding along, this is the next step.

Before you look at a single listing, I'd want you to do the math.

Not to talk you into moving.

Not to talk you out of it.

Just so you know what each option actually looks like.

Here's how I'd walk through it with homeowners in Centennial, Littleton, Lone Tree, Greenwood Village, Highlands Ranch and throughout the South Denver Metro.

The Short Answer

Downsizing can save money.

But only when the numbers on both sides of the move work.

The savings usually come from three places:

• Turning equity into cash you can use
• Lower monthly costs (utilities, maintenance, taxes, insurance)
• Less money going into a house you don't fully use

And the savings get eaten up by:

• Selling costs
• Buying costs
• Moving costs
• HOA dues
• A new mortgage at today's rates, if you need one
• Updates to the new home

The only way to know which side wins?

Run your numbers. Not the national averages. Yours.

Step 1: Figure Out What You'd Actually Walk Away With

Your home's value is not your profit.

Your equity isn't either.

What matters is your net proceeds: the money that actually lands in your account after closing.

Your Net Proceeds Checklist

Start with your likely sale price, then subtract:

• Mortgage payoff (and any HELOC or second loan)
• Real estate commissions (always negotiable, so ask how they're structured)
• Title insurance and closing/settlement fees
• Colorado documentary fee: small, one cent per $100 of the price, so about $80 on an $800,000 sale
• Prorated property taxes owed through the closing date
• HOA dues, transfer fees and status letters, if you have an HOA
• Concessions or credits to the buyer (repairs after inspection, help with closing costs or a rate buy-down)
• Pre-listing prep: paint, repairs, cleaning, landscaping, staging
• Moving, packing and possibly storage
• Overlap costs if you own two homes for a month or two

Zillow puts typical seller costs, including commissions, at roughly 8%–10% of the sale price historically.

Your number may be lower or higher depending on how the commission is negotiated and what you agree to in the contract.

But it's real money.

And it comes off the top.

That's also why I'm careful about how much people spend getting ready. (I wrote about how much to spend getting your house ready to sell and what's worth fixing before you list.)

Don't Forget Concessions

This one matters right now.

The Denver market has shifted.

In DMAR's September 2026 report, homes sold in a median of 32 days, and closed prices came in at 98.45% of the most recent list price.

But one metro Denver broker quoted in the Denver Gazette estimated about 66% of listings are now offering some kind of concession, compared with about 37% two years ago.

Translation?

Plan for some negotiation in your net sheet.

It's better to be pleasantly surprised than caught off guard.

Step 2: Price the Home You'd Actually Buy

This is the step most people skip.

They know what their house is worth.

They have no idea what the next house costs.

For context, DMAR reported a metro Denver median close price of $635,000 for detached homes and $365,500 for attached homes (condos and townhomes) in September 2026.

But medians don't tell you what a one-level ranch in your favorite Centennial neighborhood costs.

And here's the surprise for a lot of downsizers:

The homes everybody wants for right-sizing, like ranches, patio homes and main-floor-primary layouts, are often priced closer to your current home than you'd expect.

Less square footage doesn't always mean less price.

When you price the next home, include:

• Purchase price
• Buyer closing costs (Zillow cites roughly 2%–5% of the price, depending on the loan)
• Inspection and appraisal
• Any updates you'd want before moving in
• New furniture that fits the new space (yes, really)

Step 3: Compare Monthly Costs, Not Just Prices

This is where downsizing often does pay off.

Or doesn't.

Make two columns.

Your current home, per month:

• Mortgage payment (if any)
• Property taxes
• Homeowners insurance
• Utilities
• Lawn, snow and landscaping
• Average maintenance and repairs

The new home, per month:

• Mortgage payment (if any)
• Property taxes
• Insurance
• Utilities
• HOA dues
• Maintenance

Watch the HOA

HOA dues aren't bad.

Sometimes they replace costs you're already paying: snow removal, landscaping, exterior maintenance, even part of your insurance.

That can be a great trade.

But in metro Denver, condo and townhome owners have been dealing with rising insurance and association fees. The Denver Gazette noted attached homes have "struggled for two years" to hold their prices against those costs.

So before you fall in love with a lock-and-leave community, I'd want to look at:

• What the dues cover
• How much they've gone up
• The HOA's reserves
• Any special assessments on the horizon

Step 4: Be Honest About the Mortgage Rate

If you have a 3% mortgage, I get it.

Giving that up hurts.

You're not alone. According to FHFA's National Mortgage Database, about 49% of outstanding mortgages had a rate under 4% as of mid-2026.

Meanwhile, Freddie Mac's average 30-year fixed rate was 7.40% the week of October 8, 2026, up from 6.30% a year earlier.

That gap matters if you'd need to finance the next home.

As a rough example, every $100,000 borrowed at 7.40% on a 30-year loan is about $692 a month in principal and interest.

But here's the flip side:

If you buy your next home with cash, or mostly cash, from your equity, today's rate may matter far less than you think.

That's why the decision shouldn't start with the rate.

It should start with the math.

Step 5: Ask About Taxes Early (and Ask a Pro)

I'm not a tax advisor, and this isn't tax advice.

But there are two things I'd want every longtime homeowner to ask their CPA or financial advisor about before listing.

The Capital Gains Exclusion

Under IRS rules (Section 121), if you sell your main home, you may be able to exclude up to $250,000 of gain from income, or up to $500,000 if you're married filing jointly.

Generally, you need to have owned and lived in the home as your main home for at least two of the last five years.

For homeowners who bought in South Denver decades ago, gains can be large.

A few things that may matter:

• Your gain is generally based on your sale price minus selling expenses, compared to your purchase price plus qualifying improvements
• Big improvements over the years (an addition, a new roof, a remodeled kitchen) may raise your cost basis, so find those receipts
• Single sellers, recently widowed sellers and anyone who's rented the home out should get specific advice

IRS Publication 523 has the full rules and worksheets.

Colorado's Senior Property Tax Exemption

If you're 65+ and currently receive Colorado's senior homestead exemption, ask what happens to it when you move.

Colorado passed a temporary law (SB24-111) that lets qualifying seniors keep a similar property tax break on a new primary residence, but only for property tax years 2025 and 2026, and you had to apply with the county assessor by July 15.

As written, that portability ends after 2026.

Check with your county assessor (Arapahoe, Douglas or Jefferson, depending on where you're buying) before you assume the break follows you.

A Simple Example (Hypothetical, Round Numbers)

This is a hypothetical illustration only, not a quote, an estimate of your home's value, or tax advice. Every number below is rounded and made up to show how the math works.

Let's say a couple owns a two-story home in Centennial.

Selling the current home:

• Sale price: $800,000
• Mortgage payoff: –$150,000
• Selling costs, including commission, title and concessions (using 8% for this example): –$64,000
• Pre-listing prep: –$10,000
• Moving and packing: –$3,000

Estimated net proceeds: about $573,000

Now two different "next homes."

Option A: A one-level ranch for $650,000

• Price plus about 3% buyer costs: about $669,500
• Shortfall vs. net proceeds: about $96,500
• If they borrowed about $100,000 at 7.40%: roughly $692/month in principal and interest

They didn't free up cash.

They spent equity and took on a new loan.

But the layout might let them stay for 20 years. That may be worth it.

Option B: A patio home for $500,000 with a $400/month HOA

• Price plus about 3% buyer costs: about $515,000
• Left over: about $58,000
• No mortgage payment
• But a new $4,800/year HOA bill

Now they have cash in the bank and no mortgage.

But the HOA needs to cover enough (snow, landscaping, exterior) to actually replace costs they pay today.

And the capital gains piece?

If they bought for $300,000 years ago and put $50,000 into qualifying improvements, their gain might be around $386,000 ($800,000 minus $64,000 in selling costs, minus $350,000 basis).

Married filing jointly, that could fall under the $500,000 exclusion.

A single seller with the same numbers might be over the $250,000 limit.

That's a CPA conversation, not a guess.

Same house.

Two very different outcomes.

That's exactly why we do the math first.

Hidden Costs People Forget

• Moving costs. Angi's 2026 data puts a typical local move around $1,696 on average, with 4-bedroom homes running roughly $1,200–$3,500 before add-ons. Professional packing averages around $1,000 more.
• Storage. If the timing doesn't line up, Angi estimates $20–$450 a month.
• Overlap. Two mortgages, two sets of utilities, two insurance policies, even for a month. If you're deciding which should come first, I walk through contingent offers, bridge loans and rent-backs in Should I Buy My Smaller Home Before Selling My Current Home?
• Furniture that doesn't fit. That dining set for 10 may not fit the new space.
• The new home's to-do list. Paint, flooring, window coverings, a few "while we're at it" projects.
• HOA increases. Today's dues aren't guaranteed to be next year's.

And the Costs of Staying

Here's the part I always put in the math too.

Staying isn't free.

If your home needs a roof, furnace, windows and a bathroom remodel over the next 10 years, that belongs in the comparison.

So does the cost of making the home work long-term, like a main-floor primary or main-floor laundry. I walked through that in Should I Downsize or Age in Place?

Some of those projects may also add value. Some won't. (Here's what home improvements actually add value.)

The fair comparison isn't "moving costs vs. nothing."

It's moving costs vs. the cost of staying.

So, Does Downsizing Save Money?

Sometimes.

It usually does when:

• You have significant equity and little or no mortgage
• The next home costs meaningfully less
• Your monthly costs truly go down
• The HOA replaces costs you're already paying

It often doesn't when:

• The right-sized home costs nearly as much as your current one
• You'd need a large new mortgage at today's rates
• HOA dues and fees wipe out the monthly savings
• You spend heavily on prep and updates

And sometimes the honest answer is:

It's roughly break-even, but your life gets easier.

Fewer stairs. Less yard. More time. More freedom.

That's not a financial win on paper.

But it might be the best decision you make.

That's the bigger framework I use in Should I Stay, Renovate or Move?

Frequently Asked Questions

Does downsizing actually save money?

It can, but not automatically. Downsizing saves money when your net proceeds cover most or all of the next home and your monthly costs (mortgage, taxes, insurance, utilities, HOA and maintenance) go down. Selling costs, buying costs, moving and a new mortgage at today's rates can cancel out the savings, so compare both sides before you decide.

How much does it cost to sell a house and downsize?

Zillow estimates sellers have historically paid about 8%–10% of the sale price in total costs, including commissions, title, fees and concessions. Then add buyer closing costs on the next home (Zillow cites roughly 2%–5%), moving costs (Angi's 2026 average for a local move is about $1,696) and any prep or updates.

Do I have to pay capital gains tax when I sell my house to downsize?

Maybe not. Under IRS Section 121, you may exclude up to $250,000 of gain ($500,000 if married filing jointly) on the sale of your main home if you meet the ownership and use tests, generally two of the last five years. Larger gains, single sellers and homes that were rented out need specific advice, so talk with a tax professional.

Should I give up my low mortgage rate to downsize?

It depends on whether you'll need to finance the next home. With Freddie Mac's 30-year average at 7.40% in early October 2026, borrowing is expensive, but if your equity covers most of the next purchase, the rate matters much less. Compare your total monthly costs and your lifestyle, not just the rate.

Is it cheaper to downsize to a condo or townhome in Denver?

The price is often lower. DMAR reported a $365,500 median for attached homes vs. $635,000 for detached homes in September 2026. But HOA dues and insurance have been rising, so review what the dues cover, recent increases, reserves and any special assessments before you assume it's cheaper month to month.

Let's Run Your Numbers

If you're in Centennial, Littleton, Lone Tree, Greenwood Village, Highlands Ranch or anywhere in the South Denver Metro, I'm happy to put together a no-pressure net sheet for your home.

What it may sell for.

What you'd realistically walk away with.

What the homes you'd actually want cost.

And whether moving improves your situation, or whether staying is the smarter call.

You don't need to be ready to sell.

You just need to be ready to see the numbers.

Stay. Renovate. Move.

The right decision starts with doing the math.

Devin @ The W Real Estate Group

This article is for general information only and isn't tax, legal or financial advice. Talk with a qualified tax or financial professional about your situation. Market figures are from the sources below as of October 2026 and will change.

Sources

• IRS, Topic No. 701, Sale of Your Home (updated Sept. 24, 2026) and Publication 523, Selling Your Home
• Freddie Mac, Primary Mortgage Market Survey, week of Oct. 8, 2026
• FHFA, National Mortgage Database aggregate statistics, Q2 2026 (summarized by Calculated Risk, Oct. 1, 2026)
• Denver Metro Association of Realtors, Market Trends Report, September 2026 (released Oct. 3, 2026), via Denver Agent Magazine
• The Denver Gazette, "Denver real estate numbers show drop in home prices", Oct. 6, 2026
• Zillow, How Much Are Closing Costs for Sellers? (Nov. 21, 2024)
• Angi, How Much Do Movers Cost? (2026 data), updated Sept. 17, 2026
• Colorado General Assembly, SB24-111 Senior Primary Residence Property Tax Reduction
• Colorado Revised Statutes § 39-13-102, Documentary fee