More than half of homeowners plan to move to a smaller property within the next three years. Downsizing from a detached to a semi typically frees up £115,970. And moving from a detached to a bungalow – the most common downsizing plan– brings in around £97,607, according to Lloyds Bank research.
The main reason we downsize is to have a more manageable home and to reduce our outgoings. Others want to free up funds for retirement or invest money for the future. We typically downsize when we’re 53. However, a fifth of people say they are downsizing earlier citing health reasons and relationship changes.
Downsizing works best if you move to a cheaper property and area. But don’t forget to budget for the average £12,000 moving costs, and when you’re making decisions about where to move, don’t overlook the value of having friends and family nearby. Do you research - bungalows and retirement flats aren’t necessarily a cheap option because of demand. Renting rather than buying gives you flexibility, but you’ll need deep pockets with record £790 monthly rents nationally.
One of the biggest challenges is deciding which possessions to part with. Try to start sorting through your belongings three months before your move, doing a little every day and tackle one cupboard or drawer at a time to make it more manageable. Make some extra cash by selling items that you no longer need or won’t fit in your new home. Try local auctions and sites such as eBay. The British Heart Foundation also offers a house clearing service with profits from the sale of any items going back to the charity.
What to do with your windfall
With your downsizing windfall, save some in an emergency fund Cash ISA and use the remainder for longer-term savings. Then invest in a stocks and shares ISA or boost your pension, or both. Take the opportunity to get yourself on track for retirement, so you can enjoy the lifestyle you wish.
If you don’t fancy the hassle of moving, then equity release is an option.
5 things to know about equity release
- You can cash in on your home, without the hassle of moving.
- You can use the money how you like eg home improvements, cruise, to help family or pay off an interest-only mortgage.
- You have to be over 55 and you must own your home.
- There are two equity-release plan types: You can release a large sum via a lifetime mortgage, or take regular smaller amounts through a drawdown plans
- Over half of 55-64s opt for lump-sum plans typically taking £81,324 while from age 75 four in five plans are drawdown plans accessing around £49,607.
- Yours Retirement Services offers an equity-release service. Send for your free Yours Guide to Unlocking Cash from your Home. Call free on 0800 915 4710, write to Freepost Key Retirement (no other address needed) or find out more here.