Many people choose to downsize their property for a number of reasons. Some of the most likely candidates include parents whose children have flown the nest, older people wanting to free up some property wealth for retirement or people who want a more manageable property with lower costs.
However, before you pack up your bags, it’s important to weigh up the pros and cons of downsizing and look at all options available. So what’s the deal with downsizing?
Advantages of downsizing
Cost savings
With a bigger house comes bigger bills, and if you’re looking for a way to cut costs then downsizing will do just the trick. Not only will you have less house to clean and maintain, but heating three bedrooms as opposed to five will save you some serious pennies.
Free up equity
If you’ve been in your current property for a good few years, it’s likely it will have gone up in value by the time you sell it, and you may be close to paying off your mortgage if you haven’t already paid it off completely. Therefore, you’ll have equity left over once you’ve downsized, to use however you want.
Additionally, you’ll be able to purchase your new home as a cash buyer, which gives you a great advantage over other prospective buyers and the ability to live mortgage-free. Sounds good right?!
A house that suits you
As we get older, our living needs change. If you’re downsizing later in life, then you can move to a home that is better suited for you. For example, a bungalow rather than a tall townhouse, or a property with a smaller garden to maintain.
Disadvantages of downsizing
Resistance to change
If you’ve lived in a big spacious property for years and years, then moving to a smaller one is a big change. It can be hard to find somewhere that appeals to you, and if you’ve got lots of belongings to move as well it can seem like an impossible task.
It can often be such a tricky decision because you may not necessarily need to downsize, more that you know it will give you a better quality of life with more disposable income.
Lack of availability
Even though you may have a nice healthy amount of money to secure your downsized home, this doesn’t mean you’ll be able to find the perfect one in an instant. You may want to stay living in a certain area, which means you may have to be patient to find another home in that location.
Additionally, property values change over time, and if you do have your heart set on a particular location, properties may be more expensive than you realise. Or you may feel you’re not going to get a decent amount of space for your money, and therefore not truly benefit from the sale.
Bungalows have always been a popular property choice for those in later stages of life, however, these are now quite hard to come by, so it’s not always easy to find the perfect smaller property.
Downsizing your belongings
Moving to a smaller house may mean that you need to get rid of some or many of your belongings, unless you’re planning on putting items into storage. For someone who’s lived in a large house for the majority of their lives, this can be quite the task! Moving house can be stressful enough without having to get rid of your things, but on the other hand, it can also be a great way to finally get rid of unwanted items and have a major clearout.
Moving costs
In the long run, downsizing will generally leave you in a more attractive financial situation, however, it’s important to remember that there are significant costs involved before you make your move. Estate agency fees, conveyancing fees, stamp duty costs and removal fees are all part of the package, so do your research before making any decisions.
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Are there any alternatives to downsizing?
In short, yes! Equity release is an option that could be the right move for you if you want to free up some property wealth but don’t want to downsize. As the name suggests, with this scheme you can release equity from your home, whilst continuing to live there.
How does equity release work?
A lifetime mortgage is the most popular type of equity release scheme, where equity is released as one tax-free cash lump sum. Interest on the amount you have released rolls up over time, and the mortgage plus any interest is usually then only repaid to the equity release provider through the sale of your home when you move into long-term care or pass away.
Alternatively, subject to your lender’s terms, it is possible to move home after taking out equity release by transferring your lifetime mortgage to another property.
If you’re considering this scheme but still want some more information, always seek professional equity release advice.
We hope this blog post has given you some helpful information, and if you’d like any further information about mving house, get in touch for a friendly no obligation chat.