If your kids have grown up and flown the nest and you’re moving closer to retiring, it’s likely that you’ve at least thought about downsizing your home. For some it can be for practical reasons, for others it might be a wish to be closer to their children if they’ve relocated, for others still it might simply be the desire for a change of scenery as they move into the next chapter of their life. But there are upsides and downsides to downsizing which need to be well-thought-out before you make what is always going to be a fairly big personal and financial decision.
The potential advantages of downsizing can be many. Living in a smaller space means you’re likely to save money on council tax, buildings insurance, gas and electricity bills and lots of other costs, letting you spend more of your pension income on enjoying life after work. It can also make the upkeep of your home considerably easier so that you’re devoting less time and effort on repairs, maintenance and cleaning as you age.
In the current economic climate, many retirees are deciding to downsize in order to free up capital. For some, this might be with the aim of enhancing their own nest egg; for a rising number of others, this is done in order to help their children buy their first home. A gift or loan from the Bank of Mum and Dad has to be funded somehow, and if much of your money is tied up in your home, downsizing frequently looks like a good way of finding the funds needed to help children secure a home for themselves.
Though, just as the housing market is making it more challenging for first-time buyers to get on the property ladder, it’s also making it more and more difficult for those who want to downsize to be able to do so. Many who want somewhere smaller to make looking after their home more manageable are finding that the cost of moving simply means staying put and paying for a handyman or cleaner is the more reasonable option. For others, the lack of houses means that finding a lesser property which ticks the boxes whilst providing the financial rewards is simply too tall an order in 2018.
So, while there are potential advantages of downsizing which can possibly help you and your family as you reach your retirement, it’s also worth remembering that those positives are not guaranteed. Moving house is both a huge emotional and financial consideration at any point in your life, so make sure you have considered precisely what you will get out of downsizing before making the decision to do so.
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