Everything you need to consider when downsizing your home

As you get older and your priorities change, you may consider downsizing your home. Whether your children have moved away and your house feels larger than you need, or you want to cash in on the equity in your property to fund retirement, there are many reasons to do so.

If you’re thinking about this, there are many pros and cons that you should be aware of. Read on to find out everything you need to consider when downsizing your home.

Make sure that you’re making the right decision

Before you start to consider the details of downsizing, it’s important to ask yourself why you want to do so. There are a variety of reasons why you may want to move, such as:

  • No longer needing as many rooms if your children have grown up
  • Wanting to pay lower upkeep for your house, such as reduced energy bills
  • Wanting to use the profit from the house to fund retirement.

There can be some issues which come with downsizing though, so it’s important to think carefully about the issue.

For a start, you may be used to a home of a certain size and space so moving to a smaller property can feel strange. If the new home is much smaller than your current one, you may also worry about where you’re going to put everything!

Furthermore, you’ll probably also have to pay Stamp Duty or Land and Buildings Transaction Tax if you moved, as well as solicitors’ fees and other moving costs. This could potentially be expensive and may eat into any money that you’d make from the sale.

If you’re looking for a smaller and cheaper home, you may find that you’re competing with first-time buyers too.

Ultimately, if you don’t like change or there aren’t many downsizing options in your area, there’s no need to downsize but you may find you can get a greater quality of life with the move.

If you’re unsure, you may want to seek the opinions of your loved ones, who can help you decide.

If you don’t want to move but need money, you could consider equity release

One of the main benefits of selling your home and downsizing is that you can access the equity that you may have built up over the years. This makes it a popular option for people who want to use the money to support their family financially, such as helping children or grandchildren get onto the property ladder.

Downsizing could also help you to live without the stress of a mortgage, as the equity from your old home could be enough to buy your new one outright.

However, if you want to stay in your home but need money to pay for later-life care or helping family members, you could always consider raising the money through equity release.

Essentially, equity release involves taking out new borrowing on your property and there are two main ways to do this:

Lifetime mortgage

With this you can take out a mortgage on your home, provided that it’s your main residence, while still retaining ownership. With this option you can also choose to ring-fence some of the value of the property as inheritance for your loved ones.

The value of the loan, and any interest that you have accrued on it, is paid back when you die or move into long-term care.

Home reversion

With this strategy, you sell part or all of your home in exchange for a lump sum or regular payments. While you have the right to continue living there, rent free, you have to agree to maintain and insure the property.

As with a Lifetime Mortgage, you can ring-fence a percentage of the property for your own use, such as inheritance.

At the end of the plan, your home will be sold, and the proceeds are divided according to the proportions of ownership.

If you’re unsure which option is best for you, you may benefit from seeking professional advice. A financial adviser can help you to decide whether downsizing is the right decision for you, or whether equity release may be more beneficial.

Working with a professional can help you to make your decision with confidence, knowing that it’s the best decision for your lifestyle and your finances.

Get in touch

If you’re considering downsizing your home but aren’t sure if it’s the right decision for you, we can help. Email enquire@london-money.co.uk or call us at 0207 808 4120 to find out more.


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