Should you downsize in retirement?

Is downsizing a good idea?

Pros and cons of downsizing in retirement

Alternative options to downsizing

Work out your finances. The cost of downsizing includes estate agent and conveyancing fees as well as moving, maintenance and improvement costs. Plus, you’ll have to pay Stamp Duty if you’re buying another property. Find a detailed list of costs in our complete guide to conveyancing fees or use our stamp duty calculator to get an estimated cost.

Changes in health and mobility could negatively impact your everyday lifestyle, so your current or new place should allow you to live comfortably. Plus, you need to keep in mind that care costs might rise as you grow older or develop any health issues.

Assess your options. There are multiple popular options such as retirement villages, that will enable you to live in a safe place and socialise with people of a similar age, as well as accessible homes that offer a comfortable lifestyle if you’re less mobile.

Think about lifestyle changes. Finances shouldn’t be the only factor that prompts your move. Make sure that your new home will improve your everyday life in terms of location, amenities, and social interactions.

Lower bills and maintenance costs. Moving to a smaller home might come with paying less for buildings insurance and utility bills. This means you’ll be able to save a substantial amount of money and use it to supplement your pension or do the things you love.

A smaller, more manageable home. This is something that you need to consider as you age, needs and priorities change. For example, it might be more sensible to move to a smaller one-level home that enables you to live independently and keep on top of household tasks.

Moving closer to loved ones. Downsizing can be a chance to make a new start and relocate closer to your family or friends. This might also be a good idea, if you’re an empty nester and you don’t want to look after a large house anymore.  

Emotional cost. Leaving the home that you’ve made memories in for many years can be a tough decision. You might feel overwhelmed by the process of selling your current home and finding a new one, especially if you’re nervous about making big changes.

Space and storage restrictions. There’s a chance that your new place won’t have room for all your furniture and personal items. You might need to sell or give away some of your belongings or pay for storage unit.

Availability. If you struggle to find an appropriate property in your preferred neighbourhood, you might have to compromise or move to a different area.

Equity release: If you don’t want to downsize you could look into getting a lifetime mortgage or home reversion plan to access equity in your home. Equity release gives you the chance to stay in your current home and convert some of its value to cash. You need to be at least 55 years old to do this and the money is repaid when the house is sold. Find out how long equity release takes.

Rent out a room. If you have a spacious house with multiple rooms, you can always rent out a spare room. The government’s Rent a Room Scheme enables you earn up to £7,500 per year tax-free from letting out furnished accommodation in your home.

Remortgage. If you’re reaching retirement and you have already paid off a considerable amount of your mortgage, you might want to look for another deal that suits your current financial needs, such as remortgaging to release equity that’s tied up in your property. Remember to research the market before making any commitments.  

Try a retirement interest-only (RIO) mortgage which is very similar to a standard interest-only mortgage and allows you to release equity. The main difference is that you’ll need to prove you can afford the monthly repayments and the outstanding loan is usually paid off when the house is sold, you die or move into long-term care.