It’s traditionally been seen as an option once offspring have flown the next, or when the task of maintaining, repairing, cleaning and heating a large home becomes too onerous.
But downsizing isn’t just an option for the elderly or people with health issues. It could be the answer if you want to raise capital in order to clear an outstanding mortgage or other debts or, for example, provide a deposit for a child’s first home.
If you have grown-up children still living with you, you are not alone. According to the Office for National Statistics, 3.3 million 20 to 34 year olds lived with their parents in 2013, 25% more than in 1996. Rising house prices have made it more difficult for young people to get a foot on the property ladder. Those that do manage it are likely to have been helped by the bank of mum and dad.
Savills, the estate agents, reckons around 55,000 households downsize each year, freeing up approximately £7 billion of equity, of which around half is used to help offspring buy their first home.
If you are considering downsizing, here are some things you need to consider…
1. Competition could hit your profits
You may get a decent price for your current home, but if you downsize too much you could find you are in direct competition with first-time buyers.
Halifax estimates the number of first-time buyers stepping on the property ladder grew by 22% in 2014. As a result, the average cost for properties bought by first-time buyers increased by 9% to £171,870.
For downsizers, this could mean that more of the proceeds from their property sale are eaten up by the cost of buying their new home. This includes legal, surveyor and estate agent fees, not to mention Stamp Duty.
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2. Make the right move
Think carefully about the area you want to move to and the kind of home you want. You may end up paying a premium for a home in an area with good public transport links, that’s close to shops and a GP/health centre. Also retirement hotspots such as Dorset, Devon, Somerset and Norfolk, all command higher prices. This could mean you end up spending more on your new home.
If you want to move to a bungalow for the ease of living on one level, you may find these are in short supply and competition for them could be fierce. Retirement villages are another option to explore. Look at how much space you’ll actually need – are there larger pieces of furniture you want to take with you? Will you need a larger rooms to fit them? Also think about any guests you many have – will you need one or more spare rooms? – or just some space to do hobbies?
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3. Get expert advice
Whatever reason you may have for wanting to downsize, you should seek financial advice, not only to ensure all the costs involved with moving home are taken into account, but also so you have a plan for what to do with the money you free up. For example, you may wish to save or invest it for your retirement.
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