Are you considering moving to a smaller property to help fund your retirement? Here’s what you need to know.
Downsizing is the term used to describe moving to a smaller property than your current one. It can be a great option in later life to free up your money and allow you to enjoy your retirement. But of course, it’s a big decision, especially if your family home holds cherished memories. Here, we consider the pros and cons of downsizing to help you make an informed decision…
Pros of downsizing
There are so many advantages of moving to a smaller property. These include:
1 The equity it releases
If you’re wondering how you’ll manage financially in your retirement, downsizing to release the equity from your home could mean a huge weight off your mind. Buying a smaller property will leave you with a larger proportion of the money from your house sale to use however you wish – helping fund your later years, paying for that holiday of a lifetime or even allowing you to gift money to your children as an early ‘inheritance’.
2 Cheaper living costs
A smaller property means less space, which can save a fortune on your monthly bills, not to mention council tax. This can offer a greater sense of financial security in retirement… as well as giving you more expendable cash to put towards the finer things in life!
3 A more accessible/manageable property
Your larger home can feel less manageable as you age, especially with a large garden. A smaller house with less outdoor space is much easier to clean and maintain. Remember to consider accessibility, too – a bungalow may be a good option if you think stairs might become a problem. Or would a flat better suit your needs?
4 Helps manage ‘empty nest’ feelings
If you’re used to the noise and chaos of family life, your home can feel decidedly empty and quiet once your children have left. But now you’ve helped them make their way in the world, downsizing can offer you an exciting new project of your own. You could research new locations and areas, giving you the chance to start over again – it can be a real adventure!
Cons of downsizing
While moving to a smaller property has its benefits, it’s important to be realistic. Here are a few disadvantages you should consider…
1 You’ll need to downsize your belongings, too
If you’re moving from a four-bedroom to a two-bedroom, it goes without saying you’ll have to get rid of some belongings to fit everything in. This can be difficult to come to terms with if you’re used to a lot of space. Consider the fact that you might have less storage space overall, such as loft and garage space.
2 Cost of moving
Even if you gain equity, don’t forget to consider the actual cost of moving. From a deposit, stamp duty and removal vans to solicitor, estate agent and mortgage lender fees, it’s important to crunch the numbers before putting your house up for sale to ensure the move is worth your while.
3 A suitable property might be hard to find
Do your research before diving in: Are there many smaller homes available in the area you wish to buy? If you have specific requirements, such as a bungalow, how frequently do these become available?
4 A new area equals new neighbours
Moving home to downsize will mean new neighbours… who might be in closer proximity that you’re used to. If you’re moving from a detached house to a semi-detached, terrace or flat, how do you feel about this? It’s an important consideration, especially if you’ve grown accustomed to peace, quiet and space.
The alternative: equity release
If you really don’t want to downsize but like the idea of having more money at your disposal during retirement, equity release could be a viable alternative. This allows you to remain in your family home while releasing tax-free funds. We’re here to help with advice on equity release.