Are you rattling around in your big family home now that your children have flown the nest? A downsize (and rightsize) can have great advantages in the long run. A new property can be more manageable to maintain, freeing up money for retirement or travel, and could mean no stairs to climb in your elderly years.
Perhaps you and your partner have kicked the idea around a few times. But you’re still not sure if you are ready. Here are some signs that it might be the right time to downsize or rightsize:
- You have an empty nest with plenty of unused space and ‘ghost rooms’.
- You are retired or retiring in the next few years.
- Your home and garden are becoming difficult or costly to maintain.
- You need additional retirement income or would like money to gift to your children.
- You are spending more time traveling than at home.
Rightsizing isn’t easily reversed and is a big decision to make, with numerous factors to consider.
Here are the 4 crucial things to consider before making the move:
The cost of moving
Most people downsizing in the UK move from a four-bedroom house to a two-bedroom apartment. It’s important to acknowledge that, just because a house is half the size in square feet, it might not be half the price to purchase or half the price to maintain.
Moving to a new house can be stressful and expensive. There are many sunk costs, including legal fees, stamp duty, surveyor costs, removals, new furniture and fittings, and estate agent fees. These average out to around £12,000 in the UK but could be much more. It pays to find out beforehand.
However, these costs could be an investment in the long run if you end up saving money or significantly benefiting from the move. For instance, you could end up with lower costs for council taxes, utility bills, insurance, house and garden maintenance, or transport.
Do your research and see how long it will take you to break even. This is only one factor to consider though, because many rightsizes aren’t just about the money.
Your social life
In retirement you should have more time to socialise than when you were working, so your social life is a very important factor.
Going on a week’s holiday to St Ives in the summer months can be extremely different to living there permanently. Don’t choose your relocation destination based on a happy holiday memory. If you do relocate, think about what your day-to-day life will be like. How easy will it be for you (and your partner) to make a new social life? Do you already have friends or family there? Will you be able to do the activities you love as easily as before? If you are a keen golfer, how close is your nearest golf club?
We all hope that our prime time years will be filled with friends and family. There’s nothing like putting 200 miles between yourself and them to dampen that dream. Consider how easy it will be for your loved ones to visit you from your new location. How long is the drive? Where would they stay? And is it easy for you to get to them to help in an emergency? Will you be able to watch your grandchildren grow up?
The implications of downsizing
A downsize or rightsize is not easily reversible so it’s important to consider any restrictions it might cause you in the future.
If you have elderly parents, it’s worth considering if they may need to move in with you at some point. Many elderly people don’t want to be stuck in a care home. It can work out to be less expensive to move your parents into your own home rather than pay for a care home.
This also can give you peace of mind that they are safe rather than them living on their own far away from you. This could mean postponing your own downsize or needing to ensure your rightsized home can suitably and comfortably fit you all.
Have you heard the term ‘Boomerang Generation’? Believe it or not, but 3.4 million people aged 20-34, and more than one in 10 couples, are back living with their parents due to financial struggles, according to research by Churchill Insurance.
This can be caused by job loss, divorce, returning from trips or university, or saving for a house deposit. So, the big question is how settled are your adult children? Do they own their own house and are they financially independent from you? If not, you may want to consider having enough room in your new home for them to stay while they get themselves back on their feet.
Freehold to leasehold
This may not appear to be of high importance, but it might be.
The property you may be considering to put up for sale is likely to be freehold. This means there is no landlord; your home is your castle, and you have power, influence and control. You can sell it, extend it and develop it. Paint it whatever colour you like - even candy red and white stripes. Not only do you own your bricks and tiles, you own the very land it sits upon.
Rightsizing will often mean buying an apartment or flat, typically on a leasehold basis. You will have a landlord and you won’t own the land itself. There will be a detailed and lengthy tenancy agreement, full of small print and do’s and don’ts. There will be a service charge, ground rent and possibly a tenancy sinking fund to cover costly one-offs.
Living in a leasehold property could mean joining a tenant’s committee, dealing with disagreeable neighbours, and potential issues when attempting to extend the length of the lease. All of these factors do need to be considered carefully in advance.
Hopefully, this blog has helped you shed some light on whether it’s the right time to downsize for you. If you would like to meet with a financial planner for assistance in coming to a decision and with the additional money gained from rightsizing, contact us today.