Downsizing Done Right: Tips for Empty Nesters – Part 5: Unlocking & Using Your Home Equity

Downsizing Done Right: Tips for Empty Nesters – Part 5: Unlocking & Using Your Home Equity

Equity release is one of the biggest (and most common-sense) benefits of downsizing for empty nesters in the Minneapolis Saint Paul metro area—especially in the south metro (Lakeville, Apple Valley, Eagan, Burnsville, Bloomington, and surrounding communities). After 20+ years in a home, many people have built substantial equity—often enough to buy a smaller townhome or condo in cash and still have money left over. Here’s how it works and what to think about next.

How Equity Builds & Why It’s Like a Forced Savings Account

You make monthly mortgage payments → principal goes down, equity goes up.
You get tax deductions on mortgage interest and property taxes.
Your home appreciates over time (historically 3–5% annually in the Twin Cities area).
After 20+ years, many empty nesters have their home paid off or with a very small mortgage remaining.

This equity is real money you can access when you sell. Example: A $500,000 home with $100,000 left on the mortgage could net $350,000–$380,000 after commissions and closing costs (depending on market conditions).

What You Can Do with That Equity

Buy your next home in cash
Many clients sell their larger single-family home and purchase a townhome or condo outright—no new mortgage, no monthly payment (just HOA fees, taxes, utilities). This eliminates debt and simplifies retirement cash flow.
Pocket the leftover cash
If you buy a smaller place for $250,000–$350,000, you could walk away with $100,000–$200,000+ in your pocket. Options include:
- Index funds or safe investments (talk to your financial planner).
- Supplement retirement income (interest/dividends as passive cash flow).
- Travel, hobbies, family gifts, or emergency fund.
Invest in passive income
A few clients use part of the equity to buy a rental property—creating monthly income in retirement. This can be a smart way to keep growing wealth while downsizing your primary residence.
Avoid renting long-term
Rent costs have skyrocketed in Minnesota. Owning a paid-off townhome or condo (with only HOA fees, taxes, and utilities) is usually far cheaper and more predictable than renting long-term.

Key Considerations Before Downsizing

Talk to your financial advisor and tax professional — They can run the numbers on capital gains exclusion ($250k single/$500k married), investment options, and tax-efficient ways to use equity.
Understand your net proceeds — Sale price minus mortgage payoff, commissions, closing costs, moving expenses.
Plan your next move — Will you stay local (townhome/condo) or go snowbird (second home in a warm state)?

Downsizing isn’t just about a smaller home—it’s about unlocking equity to fund the retirement lifestyle you want. Whether you buy in cash, invest the surplus, or create passive income, the financial freedom can be life-changing. If you’re an empty nester in Lakeville, Apple Valley, Eagan, Burnsville, Bloomington, or the south metro thinking about downsizing in 2026, let’s talk. As a real estate agent in Lakeville MN with over 20 years helping sellers and buyers make smart transitions, I’ll help you calculate your equity, run the numbers, and plan your next chapter.

Ready to unlock your equity and downsize right? Text or call me today, Tom Sommers with Coldwell Banker Realty, for a free, no-obligation consultation. Let’s make your retirement dreams real.