2.9 million over-55s are planning to downsize their homes in the future. This is a 200,000 drop from 2018, when the number was 3.1 million.
Legal & General estimated that three-quarters of over-55s own their homes, with many of these larger than the average UK property. Key reasons over-55s report for not downsizing are attachment to their properties, the surrounding community, and their outdoor garden space.
Currently, in the UK, there is a demand for properties of all sizes, with an average of 15 buyers per available property. The number of properties on the market is down 26% from the usual average, as discovered in figures collected by NAEA Propertymark and Zoopla.
The lack of over-55s downsizing is potentially a contributing factor to the shortage of available properties on the market.
With fewer over-55s choosing to downsize, equity release is becoming a popular alternative, with lending figures near pre-pandemic level, as reported by Today’s Wills & Probate.
If you are over the age of 55 and are considering the next steps regarding your property and finances, it is important to understand the ins and outs of downsizing, the benefits, and problems it could provide you, but also to understand the alternative options you have if downsizing isn’t appropriate for your circumstances.
How does downsizing work?
Simply put, downsizing is the process of selling a home to move to a smaller home. Usually, people choose to downsize because they have gotten older, their partner may have passed, or all of their children have moved out, meaning they don’t need as much space anymore.
What are the benefits of downsizing?
There are many benefits to downsizing, especially if you no longer need the space or you are getting older and aren’t able to do as much as you once used to be able to. Some of the benefits include:
- You can choose a more affordable home in a location that you might not have been able to afford previously due to needing a larger size property
- There are fewer costs with a smaller home, with fewer rooms to furnish, water and electricity bills will likely be less, cheaper council tax, maintenance and repair costs will also likely be lower, etc.
- There will be less upkeep with a smaller home, and this is particularly a benefit for those who are getting older and aren’t as mobile anymore
- If the new property is cheaper, it means you will have money that can be put away in your savings or used for everyday living costs
What problems can there be with downsizing?
Although there are noticeable benefits when it comes to downsizing, there can correspondingly be problems too, and these can include:
- Selling and purchasing a new home can be a considerably expensive process, with fees including stamp duty, legal, estate agents, removal, etc.
- It can be a stressful process
- There will be less space than in your previous home. This could cause problems, especially if you have lots of belongings that now don’t fit.
- Depending on whether you are moving far away or not, you might be faced with leaving friends and family behind
- The new areas might not offer the same amenities and other benefits
Is downsizing right for you?
Downsizing isn’t necessarily the right decision for everyone. It is down to each person’s individual circumstances.
If downsizing isn’t the right choice for you, there are other options that you can consider instead, such as equity release. Equity release is where you can release cash from your home without having to move, and it is done by either a lifetime mortgage or a home reversion plan.
A lifetime mortgage is the most common way that people decide to do equity release. It is where you borrow money against your home.
A home reversion plan is uncommon when it comes to equity release. It is a way to raise money by selling all or part of your home, but allowing you to continue to live in it until you have to move into permanent residential care or you pass away.
Is equity release better than downsizing?
There is no one-size fits all “better” option when it comes to your personal circumstances. For some, downsizing might be the better option, and for others, equity release might be more suitable. However, if you are considering equity release as an alternative, there are some essential factors to consider, especially as there are both advantages and disadvantages of it.
The key advantages to consider for equity release include:
- You get to stay in your home
- You can choose to repay when you die, move out or permanently move into a care home
- You will never pay more than the value of your property
- Low interest rates
- You can pay less inheritance tax when you die
- You can access money when needed
The key disadvantages to consider for equity release include:
- There are early exit fees
- Your home cannot be left as a part of your estate
- Your debt is increased with interest
- You will be unable to take another loan out against your property
- There are set up fees
Get expert help with buying, selling and equity release with our residential conveyancing solicitors in London
If you are interested in downsizing your home, our residential conveyancing solicitors in London can help with matters involving buying and selling property. Or, if you are alternatively interested in equity release, we can provide expert advice to assist you.