Downsizing Your Property
Throughout our working lives, most of us will have got used to striving for bigger and better things. Whether that’s a bigger house as our family grows or a more luxurious car, most of us will have aspired to bettering ourselves at some time or other. However, in retirement ‘bettering yourself’ can often be achieved by scaling down your possessions and assets and nowhere is this truer than in choosing to downsize your property – but only in the right circumstances.
When Downsizing Can Make SenseFirstly, if you live in a fairly large house because you had children growing up in it, if the children have long since moved out, you might find that, even on a comfort level, the house might just seem too vast and empty if you’re living there alone or there’s just the two of you. Additionally, a bigger house means more to clean and more things to maintain so, in moving to a smaller place, this means that you’re more likely to save money on general maintenance, keeping it clean and tidy will be easier, your utility bills and council tax are likely to be lower and a smaller home is also likely to be more cosy and homely for the two of you than perhaps the larger home would seem to be. But, probably the most important factor in downsizing is that by trading down to a less expensive property, you’re able to use part of the equity from your selling your larger home to help with funding your retirement.
Why You Need to be CarefulDownsizing would, therefore on the face of it, seem like an ideal solution but there are certain issues you need to be aware of. If you’re simply selling your large expensive house to buy a smaller property outright with the profits and then simply using the remaining cash to top up your existing financial provisions in retirement then, apart from factoring in all of the other costs associated with buying and selling property such as legal fees, surveyor’s fees etc., you’re unlikely to encounter any real problems.
If you choose to downsize in order to use the bulk of the equity to help with your finances and yet you’re still going to have a small mortgage on the smaller property you’re thinking of buying, you need to think carefully about the implications of doing that in terms of being certain you’re going to able to meet the mortgage repayments and to be able to make allowances for any increases in interest rates.
Remember, your home could be at risk as could your children’s inheritance if you’re unable to meet any mortgage repayments which is the kind of worry you won’t want to have in retirement. In these kinds of circumstances where you’re looking to downsize to try to get your finances back on track, there are other ways you should look at raising the cash first as equity release is not suitable for everybody. Perhaps, there are other forms of loans that can help you or even your children might be prepared to assist you financially to stay in your own house if that’s what you really want to do. After all, it’s likely that that’s in their best interests too.
However, if money really isn’t the issue and you’ve decided that you simply don’t need to live in a larger property anymore, then it is true that by downsizing, it will increase the pot of money you’ll have to see you through your retirement and it’s a good way of ensuring that you are able to reap the majority of the benefits of the cash windfall after the efforts you’ve put in throughout your working life.