Downsizing Calculator
The home you have, the home you would buy, and what each costs to run
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- General mathematical model
- Scope and limitations
- Educational estimate only. Confirm the assumptions, current rules, fees, and rounding that apply to your situation before making a decision.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter what your current home would sell for, its mortgage balance and monthly principal and interest payment, and your selling costs as a share of the price.
- 02
Enter your cost basis, what you paid plus improvements, and set the section 121 exclusion to $250,000 if you file single or $500,000 if you file jointly.
- 03
Enter the smaller home's price and closing costs, any mortgage you would take on it with its rate, and the cost of the move.
- 04
Enter a year of property tax, insurance, utilities and maintenance for each home, and what the freed cash would earn. In the advanced fields, check your current mortgage rate, the new loan's term and how fast home prices grow.
- 05
Read the cash freed and the yearly saving, then the gain above the exclusion and the ten-year table comparing staying with downsizing.
Formula
Sale proceeds after the mortgage = sale price − selling costs − mortgage balance. Cash into the smaller home = its price + closing costs − any new mortgage. Cash freed = sale proceeds after the mortgage − cash into the smaller home − moving cost. Carrying costs saved = (property tax + insurance + utilities + maintenance) now − the same for the smaller home. Gain = sale price − selling costs − cost basis; gain above the exclusion = gain − the section 121 amount, never below zero. Each year, both mortgages are paid down month by month; the year's saving is carrying costs saved + payments on the current mortgage − payments on the new one. The invested fund starts at the cash freed, grows at your return and takes each year's saving. Downsizing ahead = (smaller home's value − its mortgage + the fund) − (current home's value − its mortgage), with both homes growing at the same yearly rate.
Example
A couple's $650,000 home would cost $39,000 to sell at 6% and has a $90,000 mortgage paid at $1,400 a month, leaving $521,000. They buy a $375,000 home for cash with $7,500 of closing costs and spend $6,000 on the move, so downsizing frees $132,500. The smaller home's property tax, insurance, utilities and maintenance come to $14,400 a year against $22,900, saving $8,500, and with the mortgage gone they save $25,300 in the first year. Their gain is $516,000, $611,000 after selling costs less a $95,000 basis, so $16,000 sits above their $500,000 joint exclusion. Switching costs $52,500 on the day. Investing the freed cash and savings at 4%, with both homes growing 3% a year, downsizing catches up with staying in year 6 and is $58,765 ahead after 10 years: $503,969 of home equity plus a $428,342 fund, against $873,546 of equity from staying. That is after giving up $94,577 of price growth on the larger home.
Definitions
- Cost basis
- What you paid for the home plus the cost of improvements. The gain on a sale is measured from it.
- Section 121 exclusion
- The federal rule that lets you exclude up to $250,000 of gain on a main home, or $500,000 on a joint return, if you owned and lived in it for two of the last five years.
- Carrying costs
- What a home costs to hold each year apart from the mortgage: property tax, insurance, utilities and maintenance.
- Selling costs
- Agent commission, transfer taxes and the seller's closing costs, usually quoted as a share of the price.
- Home equity
- A home's value less the mortgage owed on it.
Good to know
Where the freed cash comes from
Downsizing releases money in two ways: a lump of equity on the day you move, and lower costs every year afterward. The lump is simpler to work out, but only if every deduction from the sale price is counted. Start with the price your home would sell for, then take off the costs of selling it. Agent commission, transfer taxes and the seller's share of closing costs commonly add up to several percent of the price; on this page's example, 6% of a $650,000 sale is $39,000. Next comes the mortgage payoff, $90,000 in the example, which leaves $521,000 from the sale. The smaller home then takes its share. Buying a $375,000 home for cash with $7,500 of closing costs uses $382,500, and the move itself costs $6,000, so the example frees $132,500. Two choices change that figure a great deal. The first is the price of the smaller home. Downsizing in space does not always mean downsizing in price, especially when the smaller home is newer, closer to town or in a sought-after area, and a small price difference can leave little or no cash once the costs of selling and buying are paid. The second is whether to borrow for the smaller home. A mortgage on it frees more cash today but brings back a monthly payment and interest, which the ten-year table on this page accounts for through the new mortgage, its rate and term. Finally, remember that the cash freed is not the same as the gain on the sale. The gain is what the tax rules look at, and it is measured from your cost basis, not from your mortgage balance, so a home with a small mortgage can still have a large taxable gain. The section on the home-sale exclusion explains how this page reports it.
The running costs that shrink with the house
A smaller home usually costs less to run every year, and over a decade that yearly saving can matter as much as the cash released on the day. This page counts four carrying costs for each home: property tax, home insurance, utilities and maintenance. On its example, the current home costs $22,900 a year to carry, $7,800 of property tax, $3,200 of insurance, $5,400 of utilities and $6,500 of maintenance, and the smaller home $14,400, so downsizing saves $8,500 a year. Maintenance is the line most often guessed low, because a larger, older home's roof, heating and cooling systems and exterior all cost more to keep up, and the bills arrive unevenly. The home maintenance page can help set a realistic yearly figure. Property tax needs particular care, because buying a home can reset its assessment. Several states limit how fast the assessed value of a long-held home can rise. Florida's Save Our Homes rule caps yearly increases on a homestead at the lower of 3% or the change in the Consumer Price Index, 2.7% for 2026, and California's Proposition 13 limits increases in assessed value to 2% a year from a base of 1% plus voter-approved debt. Both reset to market value when a home changes hands. A long-time owner there may pay tax on a value far below today's price, and a smaller home bought at today's price can carry a property tax bill close to, or even above, the larger home's. Check the actual tax a recent buyer of a similar home paid. Mortgage payments are counted separately. In the example, paying off the $90,000 mortgage ends $16,800 a year of payments, which brings the first year's saving to $25,300. Part of each of those payments was principal that you were paying into your own equity, so the ten-year comparison counts the equity in both homes rather than treating the whole payment as a cost.
The home-sale exclusion and the gain above it
Selling a home you have lived in for many years can produce a large gain, and federal law shelters much of it. Under section 121 of the tax code, you can exclude up to $250,000 of gain on the sale of your main home, or up to $500,000 if you are married and file a joint return, provided you owned the home and used it as your main home for at least two of the five years before the sale. You generally cannot use the exclusion if you excluded the gain on another home sold in the two years before this one. The amounts are written into the statute and are not adjusted for inflation, so they cover less of a typical long-term gain every year. The gain is not the sale price, and it is not the equity. It is what you receive after selling costs, less your cost basis: what you paid for the home plus the cost of improvements such as a new roof, an addition or a kitchen remodel. On this page's example, a $650,000 sale with $39,000 of selling costs yields $611,000, and a $95,000 basis leaves a gain of $516,000. A married couple filing jointly excludes $500,000 of it, leaving $16,000 exposed to capital gains tax; a single filer with the same sale would have $266,000 exposed. This page reports that exposed gain and stops there, because the tax on it depends on your other income, the long-term capital gains rate you fall into, whether the 3.8% net investment income tax applies and your state's rules. The home sale capital gains page works that out. Two habits reduce the exposure. Keep records of every improvement, since each one raises the basis dollar for dollar; routine repairs do not count. And check the ownership and use test before listing: selling a few months before reaching two years of use can cost the whole exclusion, although partial exclusions exist for some moves for work, health or unforeseen circumstances.
Ten years of both paths
The honest way to judge downsizing is to follow both choices forward and compare what each leaves you with, not just the cash on moving day. This page does that for ten years. Staying means keeping the larger home, its value growing each year and its mortgage being paid down. Downsizing means owning the smaller home, whose value also grows, plus a fund that starts with the cash freed and receives each year's saving in carrying costs and mortgage payments, invested at the return you enter. The comparison starts with downsizing behind. On the example, the day you switch you lose $52,500 to selling costs, closing costs and the move, and that is exactly how far downsizing trails staying at the start. It also gives up price growth. With both homes rising 3% a year, the $275,000 difference in value becomes $94,577 of growth that the larger home would have gained over ten years. Against that, the fund grows quickly: $132,500 of freed cash and savings of $25,300 in the first year, invested at 4%, reach $428,342 after ten years, even though the current mortgage would have been paid off partway through. Downsizing catches up with staying in year 6, and after ten years it is $58,765 ahead: $503,969 of equity in the smaller home plus the $428,342 fund, against $873,546 of equity from staying. Two inputs move this result more than any others: how fast homes appreciate and what the freed cash earns. Faster price growth favors staying, because the larger home gains more dollars; a higher return favors downsizing. Try both at lower and higher values before relying on the answer. For owners 62 and older who want to use their equity without moving, a reverse mortgage is the main alternative, and the reverse mortgage page prices it. Whichever path you consider, the years you expect to stay in the next home matter, because the costs of switching are recovered only with time.
Frequently asked questions
How much money will I free up by downsizing?
The sale price, less selling costs and the mortgage payoff, less the cash the smaller home takes and the move. In this page's example, a $650,000 home with $39,000 of selling costs and a $90,000 mortgage leaves $521,000. A $375,000 home with $7,500 of closing costs, bought for cash, takes $382,500, and the move costs $6,000, so downsizing frees $132,500.
How much does downsizing save a year?
In the example, $8,500 a year of carrying costs: property tax, insurance, utilities and maintenance fall from $22,900 to $14,400. Paying off the $90,000 mortgage also ends $16,800 a year of payments, so the first year saves $25,300 in all. The mortgage saving is really principal you would otherwise have repaid into your own equity, which is why the ten-year comparison counts the equity in both homes and not just the cash.
Will I pay capital gains tax when I downsize?
Only on the gain above the section 121 exclusion, if you owned and lived in the home for two of the last five years. The exclusion is $250,000 of gain, or $500,000 on a joint return. In the example the $611,000 received after selling costs, less a $95,000 cost basis, is a $516,000 gain, so $16,000 is exposed for a married couple filing jointly; a single filer would have $266,000 exposed. This page reports that gain; the home sale capital gains page works out the tax on it.
Is downsizing worth it financially?
It depends on how long you compare and how fast homes grow. Downsizing starts behind by what the switch costs, $52,500 of selling, closing and moving costs in the example. With the freed cash and yearly savings invested at 4% and both homes growing 3% a year, it catches up with staying in year 6 and is $58,765 ahead after 10 years, even after giving up $94,577 of price growth on the more valuable home.
What are the hidden costs of downsizing?
The day-one costs are the largest: in the example $39,000 of selling costs, $7,500 of closing costs and $6,000 for the move. A larger home also gains more dollars when prices rise, $94,577 over 10 years in the example at 3% a year. And a purchase can reset property tax to the price you pay; in Florida and California, where yearly increases on a long-held home are capped, that reset can be large.
Should I downsize or take a reverse mortgage?
They answer the same need differently. Downsizing turns equity into cash and cuts running costs, at the price of selling and moving. A reverse mortgage lets owners 62 and older draw on equity while staying in the home, at the price of interest and fees that grow the loan. The reverse mortgage page prices that path; comparing its result with the ten-year figure here shows which leaves more.
What does this calculator leave out?
The tax on any gain above the exclusion, tax on what the freed cash earns unless you enter an after-tax return, and changes in carrying costs over time, which are held at today's figures. It also cannot price space, a garden, room for visiting family or being near them. Use it as the money side of the decision.