Updated 11 October 2021
Rattling around in a big house with rooms you don’t use much? Then you may be thinking about downsizing. Moving to a less expensive home can be a great way to free up more money to spend in your retirement – but it’s not always as simple as it sounds.
The first step is to consider all your circumstances and how you might be affected by such a move – because it won’t be easy to reverse. Here are the key issues to think about before you put the family home on the market.
Always move into a home – not out of one. Look at how your new home will improve your life in terms of location, lifestyle, your social circle, amenities, activities and family connections, rather than just the money it will free up.
Remember what an expensive process moving home can be. When you tot up all the extras (e.g. legal fees, stamp duty, surveyor costs and estate agent fees) the average for the UK is around £12,000. For many individuals this would represent a year’s retirement income, so ask yourself if the move will be worth it.
Also factor in the difference in costs of living in the new property – things like council tax, insurance, energy efficiency and any increased / decreased need to use the car. Often you will be able to save in some or all of these areas, so you could offset these costs against moving expenses.
Never move to a place just because you had a nice holiday there. View every potential location through the eyes of a permanent resident, and one whose circumstances may change significantly over time. Ask yourself important questions now, rather than later: will you be able to build a good social life here? Can your family visit easily? How will it be if you become less mobile? And so on.
This can be the hardest part of downsizing and relocating. You’ve built up friends and networks over decades, and you know the area like the back of your hand. For some people, this may be reason enough to move – but you might not realise what you had until it’s 200 miles away. It can help to discuss your relocation plans among your social circle, and see what your friends are thinking about. It could be that several of you share similar aspirations, and instead of ending up scattered across the country you’ll come up with a plan between you.
You may have 20 or 30 years’ worth of memories in your family home – should you try and squeeze them all into a smaller property? Probably not. So plan well in advance. Encourage your children to take the items and keepsakes they want, and consider a house-clearance sale if are seriously downsizing and/or emigrating. Putting stuff in storage is an option, but it just kicks the problem down the road.
Plenty of people past retirement age still have elderly parents who may need long term care. You may want to explore the option of having parents living with you rather than in a care home, which would mean you need a larger property that is also suitable for the purpose. This may make sense financially, provided you are up to the challenge. It can help to discuss the issue with a financial adviser who specialises in long-term care.
Downsizing needs a positive mindset. Rather than think of it as going to your ‘retirement home’, focus on the new possibilities ahead. Remember that this is you taking back your freedom from work, 24-hour parenting and other responsibilities (most of them, anyway).
If downsizing still looks like the right move for you, then go for it. However, if all you can see is what you’d be leaving behind, you may want to consider the other ways to release value from your home, ranging from equity release to simply renting out a room. Also bear in mind that you have plenty of time to change your mind if you decide to wait and see – but if you jump too soon, it will be harder to reverse the decision.
A financial adviser can be a great help in discussing issues like this, as they will help you to consider all your circumstances objectively – not just financial ones but personal ones too.
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