Thinking about downsizing but not sure if it’s the right move? You’re not alone. A new survey reveals that less than one in four Brits plan to downsize in retirement, despite the potential financial benefits. Let’s break down the pros and cons to help you decide if downsizing is right for you.
The Downsizing Dilemma: Why Are We So Hesitant?
The thought of swapping a beloved family home for a smaller property fills many with dread. Hargreaves Lansdown’s recent study found that a third of us are simply too attached to our homes to consider moving. Another quarter blame the high cost of moving, while over 10% worry they won’t release enough equity to make it worthwhile.
The Price Tag of Downsizing: Can You Really Save Money?
Downsizing should, in theory, free up some cash, but is it really that simple?
Here’s what you’ll need to consider:
- Stamp Duty: You’ll likely need to pay stamp duty on your new property if it costs over £250,000. This tax is set to increase in 2025, adding thousands to the cost of buying a new home.
- Estate Agent Fees: Expect to pay an average of 1.42% of your property’s selling price in estate agent fees. This can quickly add up to thousands of pounds, especially for more expensive properties.
- Legal Fees: Conveyancing fees typically cost around £2,000 or more.
- Surveys: Budget for an independent survey on your potential new home to check for any issues like damp or subsidence. Costs vary depending on the property size and the type of survey.
- Removal Costs: Don’t forget to factor in the cost of movers!
- Potential Repairs and Improvements: Will your new home need any work doing?
The Bottom Line: While downsizing can release equity, the various costs involved can eat into your profits. Do your sums carefully to see if it makes financial sense for your situation.
Beyond the Money: Practicalities and Emotional Considerations
Downsizing isn’t just about finances. It can be a positive lifestyle choice, offering a more manageable living space and a chance to be closer to amenities or family.
Here’s what to think about:
- Accessibility: A bungalow or ground-floor flat can be a good choice if you’re worried about mobility issues in the future.
- Location, Location, Location: Moving closer to town could make life easier, with shops, transport, and healthcare within easy reach.
- Emotional Ties: Saying goodbye to a family home can be tough. Start decluttering early to make the process less daunting.
- Loss of Space and Features: Think about what you value most in your current home – a garden, off-street parking, a spare room for guests – and consider what compromises you’re willing to make.
- Moving Away from Community: Leaving behind friends and familiar surroundings can be a wrench. Spend time in your potential new area to get a feel for the community.
Timing is Key: Don’t Wait Too Long
Experts agree – don’t put off downsizing until it feels overwhelming. Moving is physically and emotionally demanding, so it’s best to tackle it while you’re still fit and healthy.
Here’s what to do:
- Start Planning Early: Begin decluttering and researching your options.
- Speak to a Financial Advisor: Get professional advice on releasing equity and making the most of your finances.
- Explore Your Options: Visit potential new areas and consider renting before you buy to ensure you’ll be happy in your new home.
Downsizing is a big decision with no one-size-fits-all answer. By carefully weighing the financial and emotional implications and planning ahead, you can make the choice that’s right for you.