The pros and cons of downsizing

Downsizing could mean lower overheads as well as the extra cash from the sale of your home. But there are factors to consider before you make the decision.

From reducing household bills to boosting retirement savings, there are plenty of reasons why people choose to downsize and move to a smaller property.

It’s important to consider interim costs, however, like whether you decide to rent in the area you’re thinking of moving to, as the search could take some time. There are also fees to pay when selling your home including stamp duty, survey costs, legal expenses, agents’ fees and moving costs. Your adviser will be able to help breakdown these costs for you.

Along with cutting your bills, helping you to pay off debt and putting some money towards your retirement savings goals, downsizing has other benefits too.

The stress of maintaining a larger home might become unmanageable as you grow older – leaving you out of pocket and physically drained too. Moving to a less expensive-to-run, smaller home could make your life simpler, leaving you with more time to do the things you enjoy during your retirement years.

Your financial adviser can guide you through the tax implications for downsizing, like inheritance tax and whether your estate may still be able to benefit from the residence nil rate band (RNRB) even if you have downsized your property before your death. The rules around this are complex and often come with qualifying conditions, however, so it’s essential to let your adviser examine your options and potential tax implications beforehand.

It pays to plan ahead for the type of home you need when you’re downsizing. Your mortgage adviser can help you do this and ensure you’re buying somewhere that’s the rightsize for you, as well as keeping you updated on what your eventual mortgage payment might be. They will also be able to explain the advantages and disadvantages of other options, like moving to a retirement village.

It’s an emotional decision too, especially if the home you are selling is where your children grew up and holds happy memories. Talk about it as a family so that you are all clear about the reasons for the move. Thinking about your future and planning what your retirement income and outgoings could be – in your current home compared to a smaller one– is also something your adviser can help with.

• Clear out any clutter before you move and consider selling items (like furniture) you will no longer need.
• Look at your home and assess whether any repairs are needed before you sell. Your mortgage adviser can help you with this.
• Your adviser will also be able to factor in the costs for selling your home and moving to a new one, to help you budget.
• Think about how much space you will need in your new home, for hobbies, work and when guests come to stay.

If you’re considering downsizing, your adviser can expertly guide you through the process, explain your options and ensure you are fully informed throughout the process