3 important things you need to know if you’re thinking about downsizing

As you get older, you may start thinking about downsizing. Whether it’s because your children have moved away and your home now feels too large, or you want to cash in on the equity in your property, downsizing is a popular strategy for many approaching and already in retirement.

Downsizing comes with various advantages and disadvantages. Make sure you familiarise yourself with these considerations before you start making decisions.

Work out why you’re considering downsizing

Before you start looking for a new home, ask yourself: why do you want to downsize?

Are you moving to be closer to family? Are you trying to access the equity in your home to help a child or grandchild purchase their own home, or even pay for your own later-life care?

Once you’ve worked out your main reason for considering downsizing, you can start making informed decisions about whether it’s the right choice for you.

Make sure you consult your family first before you act, as it will likely impact them too.

Downsizing to a smaller property often frees up money in your home

A common reason people choose to downsize is to make use of the money that’s tied up in their property.

By selling your home, you can access any equity you have built up.

This makes downsizing a popular option for those who want to be able to access money in the property to gift to their family, or to pay for later-life care.

Downsizing could also allow you to live mortgage-free, as the equity in your home may be enough to buy a home outright. This would mean you no longer have mortgage repayments to make, further reducing your outgoings.

A smaller home is often cheaper to run too, as there’s less to maintain. You may also find that it reduces your bills, as it costs less to heat a smaller property.

Bear in mind that there may be costs associated with downsizing.

You’ll potentially have to pay Stamp Duty or Land and Buildings Transaction Tax, as well as solicitors fees and other moving costs. This can be expensive and could cut into the money you’d make from your sale.

You may end up competing with first-time buyers for smaller, cheaper properties too.

If you want to stay in your home, you could consider raising the money via equity release

If you’re considering moving for purely financial reasons but would prefer to stay in your home, you could look at equity release as an alternative.

Equity release essentially involves taking out new borrowing on your property. You can choose to make repayments or just let the interest roll up over time. The loan amount is paid back when you die or go into long-term care.

If you’re looking to access the value of your home but want to stay in it and avoid the potential costs of moving, equity release might be a better option for you.

Get in touch

If you’d like to know how downsizing could help you and your family, please do contact us. We can help you with personalised advice on the best choice for you.

For more information, please email [email protected] or call 0131 339 2281.

Please note:

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.

Think carefully before securing other debts against your home.

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

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