If you’re thinking of moving house, you might be considering a smaller property to help cut your mortgage repayments and household bills, release some of the equity you’ve built up in your current home, or even just enjoy a change of scenery or lifestyle.
But before you commit to downsizing house, you need to do a bit of research to make sure it’s the right move for you. In this guide, we’ll go through the benefits of downsizing, consider the different downsizing options and try to work out when is the right time to downsize.
What does it mean to downsize house?
Typically, downsizing means moving to a smaller or less valuable property, and is most commonly associated with retirees or people whose children have left the family home.
Although the term ‘downsizing’ implies moving to a smaller property, it also includes those who move to a lower value house or flat, usually in order to release equity in their current property.
What are the benefits of downsizing house?
There are a number of reasons why people choose to downsize, often dictated by finances or personal circumstances. If you’re thinking of downsizing, here are some of the potential benefits:
Release equity from house - If you’ve built up any equity in your home, then selling up and downsizing is an effective way to make money. If, when you come to sell, your house is worth more than when you bought it, any surplus money will be yours once you’ve paid off your mortgage. If you downsize, this could leave you with a sizeable chunk of cash, even after you put down a deposit on a new place. You may even accrue enough equity to buy your next property outright.
Save money - Bigger houses cost more to run and maintain, so downsizing can be an effective way to cut your household bills and save money. As well as paying less in council tax and utility bills, you’ll also save money on decorating and maintenance costs. This can be particularly appealing to retirees.
Change of scenery - If you feel like a change of scenery, downsizing could offer a chance to move to a smaller property in a more desirable area, or even move to a bigger house in a more reasonably priced location.
Better quality of life - Older homeowners often downsize simply because they struggle to manage in a big family home, which can see them struggle with flights of stairs or leave them feeling lonely and isolated. Some also want to move to an area that has better public transport links and services. In such cases, downsizing to a bungalow or sheltered accommodation can massively improve quality of life.
When is the right time to downsize?
Knowing when the right time is to downsize is very much dependent on your personal circumstances. While some couples want to downsize house as soon as their children have set up on their own, others like to keep the family home intact in case they ever need the extra space for guests or if any of the children ever need to come back.
Similarly, while some people might want to downsize to release equity as soon as the final mortgage payment is made, others may prefer to stay and enjoy a house they’ve spent most of their working days paying for.
The important thing is that you only downsize when the time is right for you, or if circumstances deem it absolutely necessary. Take the time to carefully plan and make your decision, and make sure you’d be comfortable saying goodbye to your old home.
If you’re downsizing to release equity, you’ll want to move at the point in which you stand to make the most money from your property. This could be when you’ve paid off most of your mortgage or when your property’s value is at its highest, which could be shortly after you’ve had a new kitchen fitted, an extension or loft conversion built, or even if you’ve recently decorated.
If you’re looking to sell up and want to squeeze more out of your home, take a look at our guide on how to add value to your property .
Things to consider before downsizing
Although there are many great things about downsizing, it’s not all plain sailing. Here are some things you should consider before selling up.
Lack of space – Naturally, moving to a smaller property means you’ll have less room for your belongings, and you may find you have to have a bit of a clear out beforehand. You may also find you have less space for family and friends to comfortably visit and stay over.
Cost of moving - Although you’ll likely be releasing equity in your current property, you’ll still have to pay all the usual costs associated with home moving, including estate agent fees, stamp duty, moving costs, surveys and conveyancing fees, all of which could take a big bite out of any money you make. Stamp duty, for instance, is payable at a rate of 2% on properties worth between more than £125,000 and up to £250,000, 5% on those valued more than £250,000 and up to £925,000, and 10% on properties upward of this amount.
Lifestyle changes - Moving home is a drastic change that can have a big impact on your lifestyle, especially if you’re moving into a different type of property or to a new area that doesn’t offer the same community ties.
If downsizing is definitely for you, the next thing you need to do is consider all your options, such as the type of property you want to move to and how you’re going to pay for the new house.
What are your options when it comes to downsizing?
The first thing you need to consider is the type of property you want to move into, and the area you want to live in. This is vitally important, especially if you’re downsizing to release equity from your house, as it will dictate how much you’ll have to spend on your new place.
You might even find that moving to a smaller house isn’t necessarily a cheaper option, particularly if you’re looking at living in a more desirable area - so consider all your housing options, both practically and financially, before you make any decisions.
Once you’ve found a suitable place, you’ll then need to work out the best way to fund it - will you buy it outright with the equity you’ve made on your old home, or use some of the money as a deposit and take on a new mortgage?
Unfortunately, some lenders won’t offer new mortgage deals to older customers, or those who are retired. If you think this might affect you, speak to a financial advisor and they should be able to talk you through the options.
If downsizing is definitely the route you want to take, it’s a move that could free up some much-needed cash and even help improve your quality of life. But before you take the plunge, be sure to weigh up all the pros and cons to make sure it’s the right move at the right time.
At Post Office, we want you to have confidence in finding the right mortgage for your circumstances, so there are no unpleasant surprises. That’s why we’ve teamed up with Bank of Ireland UK to offer a new mortgage range that could work for you. Use our mortgage calculator to get an estimate of how much you could borrow, or find out more on mortgages at Post Office Money.