Is ‘downsizing’ the right solution?
Most people are familiar with the concept of ‘downsizing’. In the context of retirement, it means selling the home you’ve lived in and moving to a smaller home. It can also mean buying a similar sized home in an area where property prices are less expensive.
The difference in the price of the two homes, after the costs of moving, can be used to pay off any remaining mortgage or to supplement your income in retirement.
It’s a practical possibility for many people as the children will probably have left home by the time you retire, so you may not need so much room. A large family home can seem empty when there’s just the two of you.
If you are considering this route, here are some things to consider before you take the plunge:
- Make sure you actually benefit financially. If your new home is just a few thousand pounds less than your existing home, most of the money may end up being spent on the expenses of buying and selling.
- Don’t overdo it. Although the children may have flown the nest, you may want your grandchildren to stay from time to time. Make sure there’s enough room for your retirement needs.
- It’s not just the cash you release. With a smaller house there’ll be less cost. Lower heating bills, for example. If you buy a new home, there should be fewer repairs or items that need replacing. If you currently use cleaners or gardeners, perhaps you can do without these?
- Will your furniture all fit? There are two aspects to this: Do you have too much furniture for your new home? In which case, you’ll need a clear out. Perhaps more importantly, if your 3 piece suite or dining room table literally won’t fit into your new home, you may need to buy new furniture and you should factor this into your calculations.
Of course, increasing numbers of people are looking to retire abroad and downsize in the process. This brings with it a whole range of issues to consider.
Alternatively, if downsizing isn’t right for you, you can still release capital from your home by using equity release.