Quick Answer: Can Downsizing Help You Make Better Use of Your Home Equity?
Downsizing can allow homeowners to turn some of their existing home equity into funds for their next move. However, the financial benefits depend on the home's market value, remaining mortgage balance, selling expenses, replacement-home costs and future housing needs. Understanding these numbers before listing can help homeowners make more informed decisions.
Your Home May Hold More Equity Than You Realize
If you have owned your home for 10, 20 or even 30 years, you may have built substantial equity without giving it much thought.
Over time, mortgage payments may have reduced your loan balance while changes in the housing market may have increased your property's value.
For homeowners considering downsizing in Northern Illinois or Southern Wisconsin, that equity could play an important role in deciding what comes next.
A recent national report highlights just how much housing wealth homeowners have accumulated.
According to an October 9, 2026, report from HousingWire, U.S. homeowners age 62 and older held approximately $15.34 trillion in housing wealth during the second quarter of 2026, based on the NRMLA/RiskSpan Reverse Mortgage Market Index.
That represents a significant amount of wealth tied to residential real estate.
However, national housing wealth figures do not tell individual homeowners how much money they could receive from selling their property.
A homeowner in Grayslake, Illinois, may have very different circumstances than someone selling in McHenry, Antioch, Kenosha or Pleasant Prairie.
At The Star Home Team, we encourage homeowners to begin with a simple question:
What could your current home realistically sell for, and how could the proceeds support your next chapter?
Why Do Homeowners Decide to Downsize?
Downsizing is not always about moving into the smallest possible home.
For many homeowners, it means finding a property that better fits their current lifestyle, financial goals and plans for the future.
Some common reasons include:
Less Maintenance and Upkeep
A larger property may require more time, money and physical effort to maintain.
Lawn care, snow removal, exterior repairs, landscaping and ongoing home improvements can become less appealing over time.
Moving to a smaller property, townhome or condominium may reduce some of those responsibilities.
However, homeowners should compare association fees and maintenance obligations before assuming the new property will be less expensive.
A More Convenient Floor Plan
Some homeowners begin looking for a home with fewer stairs, a main-floor bedroom, a first-floor laundry room or a more manageable layout.
Others simply want less unused space.
A ranch home or well-designed townhome may offer features that better support their daily routines.
Moving Closer to Family or Activities
Lifestyle changes can also influence where homeowners want to live.
Someone currently living in Lake County may want to move closer to family in McHenry County or Southern Wisconsin.
Others may want easier access to shopping, restaurants, recreation, healthcare providers or other activities that matter to them.
Reducing Monthly Housing Expenses
Downsizing may reduce certain expenses, but it does not automatically guarantee lower monthly costs.
Property taxes, insurance, mortgage payments, utilities, maintenance and community fees should all be evaluated.
A smaller home with high association fees or a new mortgage at a higher interest rate could cost more than expected.
The goal should be to understand the complete financial picture before making a decision.
How Much Equity Do You Actually Have in Your Home?
Home equity generally represents the difference between your property's current market value and the debt secured by the property.
For example, suppose your home could sell for $450,000 and your remaining mortgage balance is approximately $100,000.
Your estimated gross equity would be $350,000.
But that does not mean you would receive $350,000 when the property sells.
Selling expenses, mortgage payoff amounts and other obligations can reduce the money available after closing.
Example: Estimating Your Potential Sale Proceeds
Consider this hypothetical situation:
Estimated home sale price: $450,000
Estimated mortgage payoff: $100,000
Estimated selling expenses and other closing adjustments: $30,000
Estimated net proceeds: $320,000
These figures are illustrations only. Actual proceeds depend on the agreed sale price, negotiated transaction costs, mortgage payoff, taxes, liens, credits and other closing adjustments.
If the homeowner purchases a replacement property for $275,000 in cash, some proceeds may remain available after the purchase and its closing expenses.
Alternatively, the homeowner may choose to use part of the proceeds toward a down payment and retain additional cash.
The right approach depends on individual circumstances.
Our recommendation: Before making plans based on an online home value estimate, request a professional evaluation of your property and an estimate of potential net proceeds.
Is Downsizing Always a Smart Financial Decision?
Not necessarily.
A smaller home does not always mean a less expensive home.
For example, a homeowner selling a larger property in Round Lake or Lake Villa may be considering a newer ranch home in Grayslake, a townhome in Libertyville or a property in Pleasant Prairie.
The replacement home could have a higher purchase price, higher property taxes or additional association expenses.
Other homeowners may discover that moving to a different community provides more affordable housing options.
The important comparison is not simply square footage.
It is the combination of purchase price, monthly expenses, maintenance responsibilities, available equity and lifestyle benefits.
Before deciding, consider these questions:
How much could we receive after selling our current home?
What price range would make sense for our next property?
Would we need another mortgage?
How would our property taxes and insurance change?
Would an HOA or condominium association add monthly expenses?
Would our new home require immediate improvements?
How much money would we want to retain after moving?
Our guide to comparing your real estate options before making your next move explains why evaluating multiple possibilities can be helpful.
Should You Buy Your Next Home Before Selling Your Current One?
This is one of the most important decisions for homeowners planning to downsize.
There are several approaches, and each has advantages and disadvantages.
Option 1: Sell Your Current Home First
Selling first can provide greater clarity about the funds available for the next purchase.
Once the sale closes, you know your actual net proceeds.
However, you may need temporary housing if you have not found your next home.
You may also feel pressure to purchase quickly if your preferred property is not available.
Option 2: Buy Your Next Home First
Buying first may make the physical move more convenient.
You could potentially move into the new property before preparing your current home for sale.
However, qualifying for another mortgage or carrying expenses on two properties may create financial challenges.
Your lender can help determine whether this approach is feasible.
Option 3: Coordinate Both Transactions
Some homeowners try to schedule the sale of their current home and purchase of their next home around the same time.
Depending on market conditions and contract terms, this could involve a home-sale contingency, negotiated closing dates or other arrangements.
Coordinating transactions can reduce the need for temporary housing, but it also requires careful planning.
For a more detailed explanation, read our existing guide:
Can You Buy Your Next Home Before Selling Your Current One?
At The Star Home Team, we help homeowners evaluate the timing of both transactions while coordinating with lenders, attorneys and other appropriate professionals.
What Costs Do Homeowners Sometimes Overlook When Downsizing?
It is easy to focus on the sale price of your current home and the purchase price of your next property.
However, several additional expenses can affect your overall financial outcome.
Preparing Your Current Home for Sale
You may need to address repairs, cleaning, painting, landscaping or other improvements before listing.
Not every home needs extensive updates.
We recommend evaluating the property's condition, local competition and likely buyer expectations before deciding which improvements make financial sense.
Our article about how we prepare and market a home for sale explains our approach.
Moving and Storage Expenses
Professional movers, packing supplies, temporary storage and moving-related services can add up.
For homeowners who have lived in the same property for decades, sorting belongings and preparing for a move may also require additional time.
Starting early can make the process more manageable.
Property Taxes and Insurance
Property taxes can vary considerably between communities and individual properties.
Homeowners moving between Illinois and Wisconsin should carefully compare tax obligations, available exemptions and insurance expenses.
Do not assume that a smaller home will automatically result in lower property taxes.
Association and Community Fees
Some condominiums, townhomes and planned communities have monthly or annual fees.
These fees may cover certain services or shared property expenses, but the coverage varies.
Review the association's rules, financial information, assessments and maintenance responsibilities before purchasing.
Closing Costs and Other Obligations
Both selling and buying can involve closing expenses.
These may include title-related charges, lender fees, recording costs, taxes, attorney fees and other transaction expenses.
The Consumer Financial Protection Bureau provides information about common mortgage closing costs.
If you have owned your property for many years, you may also want to speak with a qualified tax professional about potential capital gains implications.
Understanding these costs ahead of time helps avoid unpleasant surprises.
Where Can Homeowners Downsize in Northern Illinois or Southern Wisconsin?
The right community depends on your preferred lifestyle, housing budget and property requirements.
Throughout Lake County and McHenry County, Illinois, and Kenosha County, Wisconsin, homeowners can explore different housing styles and locations.
For example:
Grayslake and Gurnee, Illinois: Homeowners may want to compare ranch homes, townhomes and condominiums while considering shopping, recreation and local services.
Libertyville and Lake Villa, Illinois: These communities may appeal to buyers who want to remain in Lake County while exploring a different type of property.
McHenry and Fox Lake, Illinois: Buyers can explore a variety of property styles while considering access to local recreation and the Chain O'Lakes region.
Antioch and Spring Grove, Illinois: Homeowners may want to evaluate different lot sizes, housing styles and community settings.
Kenosha and Pleasant Prairie, Wisconsin: Buyers considering a move across the state line can compare Wisconsin housing options, property taxes and ongoing ownership costs.
Twin Lakes and surrounding Wisconsin communities: These areas may be worth exploring for buyers who want a different setting or proximity to recreational amenities.
Available inventory and prices change, so specific properties should be evaluated using current local market information.
There is no single community that is right for everyone.
How Can The Star Home Team Help You Plan a Downsizing Move?
Selling a longtime home can involve financial decisions, practical considerations and personal attachments.
At The Star Home Team, we believe homeowners deserve a clear understanding of their options before making a commitment.
Our approach begins with learning what you want your next chapter to look like.
We can help you:
Evaluate your current home's potential market value.
Review comparable properties and local market conditions.
Discuss preparation and pricing strategies.
Estimate potential sale proceeds using appropriate transaction assumptions.
Explore available homes that fit your preferences and budget.
Compare the advantages of selling first, buying first or coordinating both transactions.
Develop a marketing and moving timeline.
Coordinate the real estate process with your lender, attorney and other professionals.
Our team serves homeowners throughout Northern Illinois and Southern Wisconsin.
With more than 4,000 closed real estate sales, The Star Home Team brings extensive transaction experience to buyers and sellers throughout the region.
You can learn more about our milestone in The Star Home Team Surpasses 4,000 Real Estate Sales.
Frequently Asked Questions About Downsizing and Home Equity
1. Do I need to pay off my mortgage before selling my home?
No. In most ordinary home sales, an outstanding mortgage can be paid off from the proceeds at closing. Your lender or mortgage servicer provides the payoff amount, and the closing professionals coordinate the payment. Any remaining proceeds depend on the sale price and other obligations.
2. How do I find out what my home is worth?
A professional comparative market analysis can help estimate your home's current market value. Your real estate agent reviews recent comparable sales, active competition, property condition, location and other relevant factors. An appraisal is another form of valuation, but it serves a different purpose.
3. Is it better to sell my home before buying another one?
That depends on your finances, available equity, local housing inventory and preferred moving timeline. Selling first can clarify your budget, while buying first may provide greater flexibility with moving. A real estate professional and lender can help you compare the options.
4. Can I downsize if I still owe money on my home?
Yes. Many homeowners sell properties with outstanding mortgages. The important question is whether the expected sale proceeds will be sufficient to satisfy the mortgage, transaction costs and other obligations while supporting your next move.
5. Will downsizing automatically reduce my monthly expenses?
No. A smaller property may reduce certain maintenance or utility costs, but property taxes, insurance, association fees and mortgage expenses can offset those savings. Compare the total costs of both properties before deciding.
6. Can I move from Illinois to Wisconsin when downsizing?
Yes. Homeowners frequently consider properties on both sides of the Illinois-Wisconsin border. However, taxes, contracts, closing procedures and other requirements differ. Working with professionals familiar with both states can help you understand those differences.
7. Should I renovate my home before downsizing?
Not necessarily. Some improvements may help your property compete, while others may not provide an appropriate return. A local real estate professional can help evaluate which repairs or updates are worth considering before listing.
8. When should I start planning a downsizing move?
Ideally, begin exploring your options several months before your desired moving date. This gives you time to understand your home's value, review your finances, research replacement properties and develop a realistic timeline. You do not need to be ready to list your home to begin the conversation.
The Bottom Line: Start With Your Home's Value and Your Next Move
Downsizing can be an opportunity to simplify your lifestyle, reconsider housing expenses and make better use of the equity you have accumulated over the years.
But the best decision is not always to sell immediately or purchase the smallest available property.
It begins with understanding your current home's value, estimating potential sale proceeds and comparing the financial and practical implications of your next purchase.
Whether you are considering a move within Grayslake, McHenry, Kenosha or another Northern Illinois or Southern Wisconsin community, having a plan can make the transition easier to navigate.
Your home may hold more equity than you realize. Understanding what that equity could mean for your next move is a valuable first step.
Ready to Explore Your Downsizing Options?
Thinking about downsizing or selling a longtime home?
The Star Home Team can help you understand your home's current market value, evaluate potential sale proceeds and explore your next steps in Northern Illinois or Southern Wisconsin.
There is no need to make an immediate decision.
Start with a conversation about your options.
Visit The Star Home Team to get in touch, or call 847-548-2625 to request a consultation.
Sources and Additional Resources
HousingWire: Senior Housing Wealth Tops $15 Trillion for the First Time, October 9, 2026
Consumer Financial Protection Bureau: Mortgage Payoff Amounts
Consumer Financial Protection Bureau: Mortgage Closing Costs
About the Author
Susan Starwalt is the Broker Owner of Better Homes and Gardens Real Estate Star Homes and The Star Home Team, serving Northern Illinois and Southern Wisconsin.
Licensed since 1998, Susan works alongside Jim Starwalt and the company's management team to support one of the region's top-producing real estate organizations.
The Star Home Team has closed more than 4,000 real estate sales and serves buyers and sellers throughout Lake County, McHenry County, Kenosha County and surrounding communities.
Better Homes and Gardens Real Estate Star Homes | The Star Home Team
783 N Barron Blvd, Grayslake, IL 60030
Phone: (224) 293-0245
Licensed in Illinois and Wisconsin. Equal Housing Opportunity.
This article is intended for general educational purposes and does not constitute legal, tax, lending or financial advice. Consult qualified professionals about your individual circumstances.
