We’ve created this website specifically for UK based, qualified financial advisers only.
If you’re not a financial adviser we can redirect you to the appropriate part of our website.
Please confirm if you’re an adviser.
16 August 2019
Is downsizing the only option?
As homeowners reach retirement, many decide to move to a smaller home. While downsizing has advantages, it’s important to understand your client’s motivation for moving. Whether it’s financial or to feel more socially connected, there may be an alternative solution that better suits their needs.
Freeing up cash
Research has shown by moving from an average detached to a average semi-detached home, downsizers could free up around £113,000. These proceeds could help fund retirement, support family or pay off a mortgage. It could also help reduce future outgoings. Smaller homes are often easier to maintain, cheaper to run, and could be closer to amenities. But is the home your client wants easy to find?
The competition is tough
Downsizing retirees face fierce competition from first-time buyers. Stamp duty relief and government help-to-buy schemes have led to a large influx in new property owners, especially in urban areas offering better employment opportunities. These smaller homes have become sought after. And this could mean your clients considering downsizing won’t get as much for their money.
Research has shown that the UK’s housing stock is also imbalanced. There are almost 25% more four-bedroom homes on the market than there are two -bedroom homes, yet demand swings towards the latter. It’s often suggested that retirees occupying larger homes should free up this housing stock for families. Yet 49% of those wanting to downsize found a lack of suitable properties available. Inflated prices and lack of availability are proving problematic for potential downsizers.
The high costs of moving
Often a decision to downsize is financially driven. But has your client considered all of the costs involved? If you’ve moved home recently you’ll appreciate how stamp duty, solicitors and estate agent fees alone can see costs run into thousands of pounds. This could significantly eat into the proceeds made from downsizing. Here are just some of the costs your client could expect to incur:
| Average costs of moving | |
|---|---|
| Stamp duty | £2,500 (based on a home worth £250k) |
| Legal fees | £850 - £1,500 |
| Valulation fees | £150 - £1,500 |
| Surveyors fee | £250 - £600 |
| Local searches | £250 - £300 |
| Removal costs | £300 - £600 |
| Electronic transfer fee | £40 - £50 |
It’s not all about the money
While downsizing may free up funds, there are also emotional attachments to consider. Stepping away from a familiar community could leave your clients feeling isolated and out of touch with their network. It could mean leaving a home they love, and sacrificing space for family to stay over.
It’s not just the space for family. Would downsizing leave enough room for all of your client’s possessions? Sentimental belongings collected in their lifetime may not fit inside a smaller home. And 23% of last-time buyers said they’d miss having more space and storage if they downsized.
A lifetime mortgage could help
If your client is looking for an alternative to downsizing, they could consider a lifetime mortgage. By releasing equity from their home, your client could have the opportunity to stay in their existing neighbourhood, and avoid the potential stress of downsizing.
They could even use the money to adapt their home. It’s estimated only 7% of homes have accessibility features that may be required in later life. A lifetime mortgage could provide funds to plan for future accessibility needs. Whether that’s a stair lift, ramp, or wet room installation, your advice could help keep them in a home they love for longer.
Although a lifetime mortgage could help, it’s important to remember it creates a debt on the home. If your client has more affordable ways of borrowing available, these should be considered first.
A lifetime mortgage will reduce an inheritance and could affect eligibility for state benefits.
Downsizing isn’t the only option
Some of your clients may think downsizing is the only way to boost their retirement funds. High costs of moving can often be overlooked, and the prospect of leaving the family home can be uncomfortable for many. But good advice makes all the difference. And if your client is looking for an alternative to downsizing – a lifetime mortgage could help.
Find out more about our Lifetime Mortgages, and how they could be a viable alternative to downsizing.
