Downsizing Home – Everything you need to know
There are many reasons why downsizing your home makes sense.
Living in a home that’s too large for your needs can be just as much of an inconvenience as living in one that’s too small.
Selling a big house to downsize brings a wealth of benefits; from the practicalities of having a smaller home to maintain, through to saving money on annual household bills.
In most cases, selling a house to downsize will also generate a cash lump sum for the seller to enjoy!
There’s a perception that downsizing is an approach only taken by homeowners planning retirement, whose families have flown the nest. In fact, the concept of downsizing is one that’s relevant to homeowners with a wide range of personal circumstances.
Why downsize your property?
Spend less time on maintenance – trading a larger property for something smaller will inevitably reduce the amount of time you spend on household ‘chores’. In this day and age, most of us lead busy lives and the pressure of keeping on top of a large property can be an extreme burden. This burden can be intensified if you have the additional issues of ill health, or you live alone.
Reduce your monthly outgoings – Selling a house to downsize makes a lot of financial sense. Trading down will make a big difference to your monthly outgoings. Regular expenses like council tax and energy bills will decrease when you move to a smaller property, leaving you with more free cash to spend on what you want. Downsizing your home doesn’t mean downsizing your life, in fact, most people find the opposite to be true!
Release the equity in your house – Property inflation has soared over the past two decades. Those lucky enough to get their foot on the property ladder at the right time can now reap the financial benefits of downsizing, enabling them to access the money tied up in their homes.
When to downsize your home
Deciding when it’s the right time to downsize your home is a very personal affair. Some may want to downsize once the kids have flown the nest, while for others financial motivation, such as a desire to pay off debt, may dictate the timescale.
Common reasons for a property downsize include:
- The children have grown up and moved out, leaving you with empty rooms to maintain
- You are in financial difficulty and want to reduce your monthly outgoings
- You have a lot of equity tied up in your house and you want to sell up, downsize and release some equity
- Too much upkeep! Keeping a large home clean and tidy is hard work and for some that can instigate a trade down
According to a recent survey by Retirement Move, 64 is the perfect age to downsize your house. The research results concluded that people aged 64 are still mentally agile enough to deal with the house sale process without any problem, and they also benefit the most from disposing of unused space.
The survey also highlighted that half of over-60s say they struggle to maintain their current home. 20% said their home feels empty.
Help downsizing your home
Once a firm decision has been made to downsize to a smaller home, you’ll need to think about the best way to sell your current property.
Sell your existing home on the open market
Selling your home on the open property market is the most common approach taken by sellers. However, around one in three property sales fall through before completion, so it comes with significant risk.
When a sale falls through, it can add additional time and stress to an already challenging situation. This stress is increased if you’re racing against other prospective buyers to secure your dream home.
Selling your house at auction in order to downsize home
Selling a house at auction is a good choice for people who are looking to move fast. But, just like going down the open market route, there are no guarantees a house sale will be achieved.
Property auction houses will apply a listing/marketing fee and will also take a commission if a sale is achieved. If a house sale at auction isn’t achieved, the listing fees will still have to be paid, so there is a chance you could be left out of pocket.
Part exchange house downsize
If you want to take the stress out of selling your current property, you could choose to sell your house to a professional house buying company.
This effectively allows you to part exchange your house – enabling you to downsize to your new home on a date of your choice, secure in the knowledge that the sale of your current property is guaranteed.
Is downsizing your home easy?
Downsizing is essential for fluidity in the property market. When older people sell, it unlocks larger properties at the top end of the market. This allows movers to take the next step on the property ladder and frees up homes for first and second-time buyers.
Andy Hulme, mortgages director at Lloyds Bank, said;
Downsizing is clearly still a major part of the housing market, with over half of potential home movers considering a smaller property.
The volume of downsizers is therefore helping to keep the market moving, freeing up larger properties for those making their way up the ladder.
A recent report suggested that some 52 per cent of all homeowners looking to move in the next few years will be looking to downsize. This makes it the most common reason for selling a home. If you’re part of the 52 per cent, this may leave you facing stiff competition when it comes to finding a buyer and securing your new home.
Downsizing to help children onto the property ladder
Attitudes towards property wealth and inheritance are changing. 54% of homeowners age 45+ said they would rather give money, while still alive, to help a family member onto the property ladder, than leave a traditional inheritance. Many also said they would consider downsizing to free up finance to be able to do it.
43% of homeowners aged 45+ believe their children will never own their own property without financial help from family members.
Homeowners age 45+ are already under significant financial pressure, however. Existing high levels of mortgage debt, changes to state pensions and worries about finances in retirement are causing considerable concern. The pressure to help children onto the property ladder compounds this further.
The research also revealed that:
- 33% of homeowners age 45+ say they do not expect to pay off their mortgages before they reach 65.
- A further 4% fear they’ll never pay off their mortgage – that’s the equivalent of over 175,000 UK households. A significant number of homeowners expect to keep borrowing in retirement. 8% say they’ll need to use borrowing to meet daily living costs. A further 13% say they’ll need to borrow to meet one-off expenses.
- An increasing number of people are relying on property wealth to fund their retirement, especially in light of pension shortfalls. 46% of homeowners age 45+ see the wealth built up in their property as a key part of their retirement.
Danny Luke, managing director of Quick Move Now, commented:
43% of homeowners age 45+ believe their children can’t get on the property ladder without their financial help. Unfortunately, 37% of people simply don’t have the finances available to offer that assistance. The average parental contribution is £25,090, so it’s a big financial commitment.
26% of those questioned in the research said they have either already downsized, or plan to do so. This is a trend we expect to see increasing in the future.
Finance tied up in property is becoming increasingly important. For 69% of people, their home is worth more than their pensions, savings and investments. It therefore makes sense for homeowners to consider downsizing from a large, family property as their household changes.
You are able to move to a smaller property that better suits your changing lifestyle and release finance to help family members or relieve financial pressure in retirement.
Types of property you can downsize to…
If you are considering downsizing, you are likely to have a lot of options.
You may simply wish to move to a smaller version of your current property. Alternatively, you may want to consider moving to a property that has been specifically built for manageable, easy living…
- Move to a smaller traditional house
- Move to a Bungalow style property
- Move to an age-restricted apartment
- Move to a Park home
- Move to a Retirement Village
Once you have decided which property type suits your downsizing plans, the best thing you can do is put yourself in a proceedable position.
Chain-free buyers, for example, will be more desirable than buyers who are stuck in a property chain of sellers. Being one step ahead of the competition will give you a huge amount of power to negotiate and seal the deal.
Top tips for selling a house to downsize
Moving is a stressful process at the best of times, but selling a house to downsize can bring added complications. When moving to a smaller property, inevitably, you will have less room for your personal belongings. This means you’ll need to be super organised, have a good clear out and be a bit ruthless before you make the move!
Before committing to a new smaller home, it is advisable to sit down and make a thorough plan. Consider the possessions you currently have, what you want to keep and what can go.
Once you have established which possessions you want to keep, you can start your search for a smaller property that meets your needs.
- Buy a new notebook to create lists purely for the house downsize and move.
- Write a list of pros and cons to consider surrounding your property downsize.
- Create a furniture inventory. Highlight items on the inventory you want to keep. This should help you identify how much space you will require in your next property.
- Think about beginning a house declutter! Decluttering a house can take considerably longer than you think. Most of us have lofts, garages and cupboards full of memories – do you really need to take it all to your new home (especially if you are downsizing)?
- If your children have already flown the nest, don’t allow them to use your home as a personal museum of their lives. This is your perfect opportunity to hand back those boxes of old school books and record collections!
- Time to get shredding. Lots of us hold onto old household documents and paperwork much longer than we need to. Granted, some household documents are important and should be retained in a safe place, but having a whole filing cabinet full of old utility bills is totally unnecessary. It is always advisable to shred any unwanted documentation rather than throwing it in the bin to prevent identity theft!