Whether you’re an empty nester or looking to free up equity, thousands of homeowners will be looking to downsize this year. In fact, a recent study has shown that one in three homeowners aged over 55 are considering downsizing right now.
Living in a four bedroom family home with a large garden is the dream when raising children, but naturally it won’t suit everyone’s needs in later years. Here’s what you need to know about downsizing in today’s market from Simon North, Partner at Strutt & Parker’s Winchester office, one of the UK’s leading independent property partnerships:
1. Get the numbers right
“How much is your property worth and how much do you want to spend on your next home? Do your research using property search sites and get at least three agent appraisals on your current property to make sure you sell at a price that you’re comfortable with. The highest valuation isn’t always the right one.
“Remember to factor in the additional costs — tax, legal and estate agency fees — as well as a contingency spend to ensure there are no financial surprises. This may be one of your largest financial decisions of your life, but remember to look forward to the potential savings it can bring too, including reduced living expenses and more financial freedom.”
2. It is OK to be emotional
“Selling the family home where the walls echo with the sound of children playing and memories of family meals around the table will inevitably be tough. We all know houses are more than just bricks and mortar – hence our British obsession with them – so saying goodbye can bring a huge sense of loss. Keep in mind the practical trade-offs and try to look forward to a new exciting chapter in your life. It is well documented that successful downsizers feel liberated from the tyranny of household chores, upkeep, big heating bills and large gardens.”
3. If downsizing doesn’t work, try ‘my-sizing’
“On the tails of traditional downsizers is a new trend in ‘my-sizers’; those moving to a house of similar value but driven instead by a change in location, land, size or style of home. Often referred to as right-sizing, this won’t be the
usual move to a smaller house with less land. This is a common move for those in an ‘in-between’ life stage where some of the older kids have left home, and perhaps there has been a job change. They are not ready to give up the four bedrooms for the children quite yet, but no longer have a need to be close to the top school.”
4. Consider re-mortgaging
“Some downsizers use the opportunity to lower their mortgage payments on their new home by putting down a bigger deposit. Seek professional advice from a broker to ensure you get the most competitive rates – many can find the cost associated with the process outweighs their potential saving. Be aware that lenders require a far more detailed breakdown of an applicant’s spending habits than ever before, from grocery bills to care home fees. Make sure you are in the best position possible before you apply.”
5. Where to invest your equity
“When you downsize you’ll be likely to end up with a large cash sum. Leaving it in the bank isn’t going to generate much return as interest rates are still at an all-time low. Other options might include investing in the stock market, corporate bonds, equity income funds, cash ISAs or a stocks and shares ISA.
“Some investments have a minimum financial commitment, so knowing what you can …
