Downsizing Home – Everything you need to know
There are many reasons why downsizing 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 home is an approach only taken by retired homeowners whose families have flown the nest. In fact, the concept of downsizing your home is more common than you think across a wide sector of homeowners.
Why downsize your property?
Less time to spend on maintenance – trading a larger property for something smaller will inevitable 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 house 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, and those luckily enough to get their foot on the property ladder at the right time, can reap the financial benefits of selling a house to downsize, enabling then to free up any equity tied up in their homes.
When to downsize your home
Knowing when it’s the right time to downsize your home is a very personal affair. For some, the right time could come when the kids have flown the nest while others are driven by financial reasons like downsizing to pay off debt.
Some of the most common reasons that drive a property downsize are:
- The children have grown and moved out, leaving you will 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 can instigate a trade down
According to a recent survey by Retirement Move, 64 is the perfect age to downsize house. Based on a survey completed by 1,000 homeowners, the research concluded that people aged 64 are the perfect age to downsize because they are still mentally agile enough to deal with the house sale process without any problem, and they also benefit the most disposing of unused space. The survey also suggested that half of over-60s say they struggle to maintain their current home and 20% said their home feels empty.
Help downsizing your home
Once a firm decision has been made to downsize your property 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, selling your home on the open market does not com with any guarantees, with around 1 in 3 property sales falling through before completion. This can add additional time and stress to an already challenging situation, especially 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 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 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 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, allowing movers to make the step up and freeing up homes on the bottom rung of the ladder for new 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.
However, the more people that want to downsize home, the more difficult it is likely to be secure a buyer for your property and secure your new home. A recent report suggests that some 52 per cent of all people looking to move home in the next few years will be looking to downsize, leaving it in first place in the list of most common reasons for selling a home.
Downsizing to help children get onto the property ladder
Attitudes towards property wealth and inheritance are changing. It is claimed that 54% of homeowners age 45+ would prefer to give money while still alive to help a family member onto the property ladder, rather than leaving a traditional inheritance, and many would consider downsizing to free up finance in order to be able to do it.
This comes as it is also revealed that 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. Pressure to help children onto the property ladder with a financial gift compounds this pressure further.
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 also 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.
More 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+ believing 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 more important. For 69% of people, their home is worth more than their pensions, saving and investments. It therefore makes sense for homeowners to considering 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 simultaneously release finance to help family members and relieve financial pressure in retirement.
Types of property ideal to downsize to…
There are many property types that would be ideal if you are considering downsizing home.
Technically, if you are downsizing home, any property type smaller than your current home would be classed as a downsize, however there are property types that are built specifically for manageable, easy living…
- Move to a smaller traditional house
- Move to a Bungalow style property
- Move to a Park home
- Move to a Retirement Village
Once you have decided which onward property type suits your downsizing plans, the best thing you can do is put yourself in as proceedable position as possible.
Chain-free buyers for example, will probably be given president over a buyer who is stuck in a 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
Selling a house and 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, meaning you’ll need to be super organised, have a good clear out and a be a bit ruthless before you make the move!
Before committing to a new smaller home, it is advisable to sit down and hatch out a through plan regarding what possessions you currently have; what you want to keep and what can go.
Once you have established what possessions are important to keep, you can start your search for a smaller property that meets your needs and can house your possessions!
If you are downsizing home, you may find our downsizing home checklist useful:
- 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 have to keep. This should help you identify how much space you will require with your next property.
- Think about beginning a house declutter! Decluttering a house can take considerable longer than you think. Most of us have lofts, garages and cupboards full of memories, but do you really need to take it all to your new home? (especially if you are downsizing home) Moving house is the perfect time to have a good clear out. Even if you start this process 6 months before your planned move, it wouldn’t be too soon!
- 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 tend to hold onto old household documents and paperwork. 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 always advisable to shred any unwanted documentation rather than throwing in the bin to prevent identity theft!