When you reach a certain stage in life, you might start thinking about whether your home is bigger than you need. Perhaps your children have moved out, you need somewhere more manageable, you want to reduce your monthly expenses or the space doesn’t work for you anymore.
Whatever the reason, downsizing is something a lot of people talk about. But before you go ahead with it, it’s important to think about your reasons for moving as well as the pros and cons. To begin with, you could ask yourself these questions:
- Does your current home suit you?
- How would moving affect your monthly expenses?
- Do you need to be in a better location?
- How much space do you need?
- What would you do with all your possessions?
- Can you still manage household maintenance and repairs?
- What kind of home will you need in the future?
- Can you afford to move?
Selling is an opportunity to release equity
If you sell your home and buy a less expensive property, you can free up the equity that is tied into your house (equity is your interest in a property, or the portion of your home that you completely own). The freed up money could help you to pay off some of your new mortgage, boost your retirement income, or be put towards other costs you might face in the future, like helping out your children or funding long-term care.
You could save more money each month
Downsizing your home, in most cases, means you’ll downsize your bills. Depending on where you move to and the size of your new property, you could save money on everything from gas and electric to mortgage payments, council tax, insurance and maintenance. It’s always a good idea to check comparison sites like Confused.com or MoneySuperMarket to make sure you’re getting a good deal on your bills and insurance.
It’s a chance to move to a better location
As you get older, living somewhere within easy reach of local amenities may become more important, especially if your current home is more isolated. Being near bus stops or a train station, shops, cafes and restaurants, as well as health facilities like a leisure centre, doctors surgery or hospital, will make things much easier if you’re unable to get out and about as much in the future. Plus, it’ll give you the chance to be closer to family or friends.
You might find it easier to manage
Buying a new property means you’ll get the opportunity to move somewhere that suits you better. A smaller house and potentially less outside space means you’ll have to spend less time and effort on maintenance, cleaning, gardening and household chores. Plus, considering things like more suitable living space and better accessibility will make it easier for you in the future if you want to stay in your new home for a long time. But remember a smaller property may mean less space for visitors or grandchildren in the future, so take the time to think about exactly what you want.
Moving house is expensive
While you may choose a smaller and less expensive property, there are still a lot of costs to consider when moving house. You’ll need to factor in things like stamp duty, estate agency fees, mortgage and legal fees, surveying and conveyancing costs. There’s also removal costs to consider, as well as any maintenance, repairs or decorative work that needs doing in your new home.
Smaller properties aren’t always cheaper
Depending on where you want to move to, smaller homes aren’t necessarily cheaper. Things like location and proximity to local shops, transport links and amenities can really drive up prices, so make sure you do your research on the area and work out if it really is worth the hassle of moving. If you’re looking to move into a retirement apartment or assisted living, again this can be quite expensive, plus you’ll need to factor in extra costs like service charges. Read the Which! guide on Hidden costs of retirement homes for more information.
Downsizing can be inconvenient
Moving to a smaller property means you’ll probably need to get rid of possessions and furniture. For some people, sorting through years of clutter will require a lot of effort, and you may need to make some difficult decisions about what things to part with. If you do move, it’s a good idea to start this process early, giving you enough time to sell unwanted items or donate them to charity, friends and family. For everything else you’ll need to arrange household recycling or rubbish collection, or take any waste to your local centre.
It won’t cover your retirement costs
While there’s no problem with downsizing because you need to, and because it can provide a welcome boost to your savings, it’s not a good idea to rely on it to fund your whole retirement. With people often underestimating how long their retirement will be, for the average household, the amount of income that could be generated by downsizing is likely to be a small fraction of what you’d need to live on – even when topped up by the State Pension. To achieve a good quality of life in old age, putting money into a pension as early as you can is the best strategy for the majority of people.
More on thinking about retirement
Understanding pension tax relief
Pension tax relief can seem like an alien concept, but it pays to make the most of it.
The pros and cons of flexible retirement
Flexible retirement may sound like great option for people wanting to take things easier in later life, but it’s important to weigh up the practicalities.
The financial impact of marrying in later life
For older people, avoiding tying the knot with a partner could have considerable implications for their finances.
5 easy steps to plan the retirement you want
No matter when you plan to retire, it’s never too soon to start thinking about the retirement you want. But you don’t have to be a pensions expert. Spending a bit of time now working out what you’ve got so far could help prepare you for the future and a better retirement.