Downsizing your home
At first glance, moving to a smaller property might not make that much sense. You might have spent years trying to move up the property ladder, so why would you want to start to climb down it?
Why do people downsize their home?
A larger home is usually there to cater for a larger family. Once the children have grown up and moved out, staying in your existing home might not make financial sense. As well as the vacated rooms not being used, bigger homes are more expensive to insure and then there are maintenance costs to think about.
Moving to a smaller property can deliver a welcome cash injection in time for retirement. This might enable someone to financially assist a family member in their property hunt and also prove to be a cheaper way of life in the process. While it can seem like a win-win situation for all involved there are a number of factors you should take into account when considering the move.
What do I need to consider when downsizing?
Once you’ve weighed up the reasons why you want to downsize, you need to start thinking about the financial implications this will bring. These include:
Moving to a smaller property means you have less space for your belongings. One option would be to sell or give away items you won’t use to avoid paying for storage and transportation fees. Parting with possessions, as well as moving itself, can be an emotional experience but the cash raised from it could potentially fund holidays or pay for other aspects of your move.
- Competition and costs
Despite your good intentions, downscaling can pit you against first-timers buyers looking for similar-sized properties. As there are more people seeking their first home than those downsizing, this could delay your search for a new residence.
There are also extra costs involved with buying a house to consider. While changes to stamp duty might work in your favour, there are other legal, transactional and surveyor fees to think about. It’s worth taking stock of these add-ons and budgeting for them well in advance.
- Long-term care
If you’ve sold your house to move to a smaller property or different location, you should think about the costs of taking care of yourself as you grow older. Your pension will help but consider setting aside some money generated from your move, in case your circumstances suddenly change. It’s also worth thinking about practical aspects of your move: would a bungalow make more sense if you struggle with stairs? Are there suitable transport connections around you? Will you be near enough to hospitals and family members?
Downsizing doesn’t always have to mean actually selling your home. It could make financial sense to rent out your current property and move into a smaller place if you want to earn a little extra income. You may want to eventually pass down the property to a family member so this option could tick all boxes if that’s your aim.
If the value of your home has increased over the years, you may want to hold off on the celebrations. Ideas such as the ‘mansion tax’, have you yet to come to fruition. But, it’s definitely worth thinking about how much tax you might have to pay if you sell your home, and keeping track of changes to tax policy.
If selling your house is proving to be difficult, you could explore the part-exchange route. It’s one way to get your hands on a new build home while side-stepping estate agent fees. It’s a good idea to contact property developers to see what you could get in exchange for your property.
- See a financial advisor
Finally, if you’ve been at your current property for a while then the chances are that you might not have needed to discuss your finances for some time. Make sure you leave no stone unturned as moving house can be a stressful process, especially as you get older. Get independent financial advice to find out what your options are.
- Could Covid-19 help you save?
- What does the term “furlough” mean?
- Ways to save money in 2020
- Infographic: Parents and Christmas
- How do tax credits work?
- What is a trust fund?
- What is Inheritance Tax?
- Closing down a bank account after a death
- What is Marriage Tax Allowance?
- What happens if you don’t leave a will?
- Registering a death
- What happens to property after a divorce?
- Will a prenup protect me if I get a divorce?
- How much does a divorce cost?
- Looking after your credit score while you’re at university
- Guide to credit and debit card protection
- Cashless society and changing savings habits for kids
- Living and working on the UK Minimum Wage
- How to budget if you’re a single parent
- Infographic: Average Equifax Credit Scores across the UK
- How to budget at university
- Guide to sending money overseas
- How to budget for kids going back to school
- How the Budget 2018 will affect your earning, spending and saving
- Infographic: How much does it cost to get married?
- What is the workplace pension?
- Infographic: Millennials and money - What kind of side hustles are they doing?
- Budgeting for the holiday season - gifts
- Budgeting for a wedding
- How much rent can I afford?
- Pension tools and resources
- Planning for early retirement
- Downsizing your home
- What will my state pension be?
- Budgeting for a baby
- Budgeting for a holiday
- An introduction to investments
- Budgeting for a funeral
- Financial planning for parents
- How transferring pensions works
- Helping elderly parents manage their money
- Budgeting for school holidays
- Looking after your financial documents
- New Year, new start to your finances
- How to avoid overspending on special occasions
- Financial Jargon Buster
- Getting Financial Help – The Best Online Resources
- Explaining the Different Types of Savings Accounts
- Understanding Payment Cards
- Money Saving Strategies – Tips on How to Save
- How to Budget Your Finances