The potential upside of downsizing 

Throughout our lives, our house moves tend to be aspirational, a climb up the property ladder. There’s the first home, which is likely to be a compromise between dreams and affordability. There’s the move up to a small semi, then – perhaps with more children in tow – up to a 4 bedroom home. 

With the mortgage paid off, you might simply stay in the big house. But you might have to ignore the fact that it became too large when the children left home, and your empty nest is demanding ever more of your time and resources on maintenance. 

Waiting until a crisis— such as a fall or the loss of a partner— will only make moving harder. Make your move while you are still fit enough to deal with it all, and thinking about such things as stairs and access will make life easier now and in the future.

Thinking about downsizing, making your way back down the housing ladder that you worked so hard to climb can seem like defeat, and stepping into a final chapter of life.

But there are actually some very positive sides. 

The positive side of getting smaller

Money might not be your main reason for moving. You’re probably mortgage-free, and you could simply stay where you are. But there are financial advantages of downsizing to a smaller home. Lower council tax and much smaller energy bills are the obvious immediate savings, but they don’t stop there.

With a smaller property to maintain, fewer rooms to furnish and much less housework to do the real savings will be longer term. As the years go by, you will feel even less keen on DIY repairs and general cleaning. A smaller home will be easier to look after and save time and effort as well as money.

There will inevitably be some costs to cover with a move. There will be fees for buying and selling property. Estate agent fees, surveyors, remedial work that your current home needs to get it to a sellable state.  There will be a solicitor to brief and pay for. There will be costs of the move itself, and the cost of buying your new home will be inflated by the stamp duty land tax fees. The moving team and some redecoration and new furniture for your new home will also need to be covered, but you will still probably be looking at a sizable cash boost from downsizing.

Selling a large family home will probably mean releasing a large amount of equity that you have built up over the years. Even if you have not already paid off your mortgage, downsizing will possibly mean you can buy your new home outright.

Making the move work for you

As with most aspect of finances, careful planning is important when you are downsizing.

A large cash sum is too valuable to be left as savings in a bank, where inflation will eat away ats its value. You probably need to think about investing, and potentially letting your extra wealth make a real and ongoing contribution to your retirement income. 

At Continuum we can give you the support you need at every stage. We can help you look at a mortgage if you still need one. We can help you ensure that your downsizing is as tax efficient as possible, which could mean saving thousands from the taxman’s clutches.

And perhaps most important of all we can help your newly released wealth work harder, with an investment strategy that works around your resources, timescale and needs.

To find out more, call us today.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice, or a recommendation to a particular investment, saving or mortgage strategy you should seek independent financial advice before embarking on any course of action.

The Financial Conduct Authority does not regulate deposit accounts and taxation advice.

Your home may be repossessed if you do not keep up repayments on your mortgage.

You may have to pay an early repayment charge to your existing lender if you pay your mortgage early.

When investing your capital is at risk.

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