You are probably already familiar with the term ‘downsizing’. Basically, it means selling your current home and moving to a smaller one. It’s quite a popular move for those approaching retirement. Let’s take a look at some reasons you might consider downsizing your house and the pros and cons of doing so.
When is downsizing your house a good idea?
You might consider downsizing for a number of different reasons.
Perhaps you are looking to boost your retirement finances or reduce your current expenses. Maybe the kids have finally left home, leaving behind empty bedrooms and lots of extra space that you no longer have use for.
It could be that you are looking to move into a house that’s easier to manage or move about in. Or maybe you simply want to move to a more suitable location.
There are many good reasons to consider downsizing as retirement approaches. But should actually you actually do it?
Let’s look at the pros and cons of downsizing your house.
Pros
- It provides an opportunity to choose a property better suited to your needs as you get older.
- It gives you a chance to move to a more favourable location, perhaps nearer to family or friends, to a quieter neighbourhood, or to a location that’s more convenient for your needs.
- A smaller house means lower utility bills, home insurance and maintenance costs.
- By selling your house and buying a smaller one, you can release the equity locked up in the house to fund your retirement.
Cons
- If downsizing means moving to a different location, it can also mean leaving family, friends and neighbours behind.
- A smaller home means less space and may cause you to feel cramped.
- It may require a significant adjustment to your lifestyle, which can both take time and be a little overwhelming.
- Moving home comes with considerable costs that can quickly add up if you are not careful.
What should you consider before downsizing?
Asking yourself the following questions before you take the plunge can help you establish whether downsizing your house is right for you.
- Are you downsizing for the right reasons? If you’re not happy to downsize, are there any other solutions?
- How will having less space affect your lifestyle?
- What do you know about the area you are moving to?
- How will downsizing benefit your finances in the long term?
- How much is your current home worth and how much will it cost you to downsize?
You can find out how much your home can realistically sell for using an online property valuation guide, such as Zoopla.
You’ll need to research the moving costs involved in both your sale and your purchase. Consider all costs, including your deposit, stamp duty, survey fees, legal fees, valuation fees, any early repayment charge on your existing mortgage, and so on.
Where should you downsize to?
As for where you should downsize to, it’s completely up to you and it will depend on your individual circumstances.
One option that is quite popular and that might be worth considering is a retirement community for pensioners.
A good number of pensioners chose to downsize in these communities, and for good reason.
- Most retirement communities are gated, providing a greater sense of safety and security.
- Some come with maintenance included as well as cooking and cleaning options, reducing your overall workload.
- Some have onsite care services and amenities including exercise classes and recreational activities to keep you active.
- The community will be made up of people your own age, with whom you can socialise.
Takeaway
From saving on utility bills and freeing up the equity in your house to boost your nest egg, to moving to a more desirable house or location, there are many good reasons to consider downsizing as you near retirement.
Before heading down this path, it’s useful to consider other important factors, including how much it will cost you and how it will impact your lifestyle.
