Most people reach a time at some point in their lives when they have to consider downsizing.
It might be that your children are grown up with families of their own and you find that you’re rattling around your four/five bedroomed property. Alternatively, it might be that your marriage has ended and you’ve got to move into a smaller property because you’ll only have one wage to rely on. Whatever your situation, downsizing could be a wonderful experience, if you do it right.
Try to think logically
It can be easy to think about the happy memories you’ve had in your home which can make leaving hard to bare but you’ve got to try and think positively about the future. You’ll make new memories in your new home and won’t have the burden of a property that’s too large for you. In downsizing to something smaller you could save on your mortgage costs, heating bills, home insurance and council tax (depending on where your new property is located).
Moving somewhere smaller should mean that you can spend less time cleaning and/or gardening, unless this is something you enjoy doing of course. Many people find once they do downsize that they wished they’d done it sooner. Downsizing can be liberating.
Plan for the future
If you are planning on spending your retirement in your new property then you might want to make sure that the property is close to bus stops and/or local shops for when driving isn’t an option. You’ll want to live somewhere where there are neighbours you can call on in emergencies, as living in the sticks could be quite isolating.
If you’re downsizing because of a relationship breakdown then you might feel like your next property is only to be a stepping stone, which is fine. Again, you may wish to have neighbours living close by, especially if you’ll be living on your own but being close to bus stops mightn’t be high on your propriety list if you drive. The important thing is to choose a property that will appeal to buyers in the future and won’t make you overstretch yourself in the meantime.
Time to cut down?
Too many people struggle to cut down their belongings when the time comes to downsize but it really is important that you are as ruthless as possible. You want to feel comfortable in your smaller surroundings, and this means getting rid of some of your furniture, trinkets and belongings. If you find it difficult why not ask a family member or friend to help you?
You may be tempted to put some items into storage but this can be costly and won’t be a long-term solution. You could end up paying hundreds of pounds a year storing things you don’t need – so why not bite the bullet and get rid now instead?
Will you need a mortgage?
If you’re already mortgage free then the move might be relatively straightforward. If not, the ideal solution is clearly to buy somewhere that you can afford with the cash you have left once you’ve sold your existing house and cleared the mortgage – so your new property will be mortgage free. However, if you aren’t going to have enough left to buy the house you want outright you may need to get a home loan to cover the difference. If you are downsizing because you have, or are about to, retire you may find it hard to find a mortgage lender. Understandably lenders will be wary about how you will repay the mortgage once you’ve retired, as most people do experience a drop in income. Some lenders also have maximum ages by which they expect any mortgage to be cleared. It is worth speaking to a broker, such as Ocean, as they may be able to advise you on those lenders that are more flexible about lending to older borrowers. Either way, you will want to make sure that you will be able to afford the repayments once you’ve retired.
Think about how you’ll finance the move itself
You’ll also have to think about moving costs, any Stamp Duty and legal fees which will have to be paid. You mightn’t be able to get as much for your current property as you would like so this could put your downsizing dreams on hold, especially if you’re hoping to use the money you make to buy your next home outright.
If you do sell your home then you shouldn’t have to pay Capital Gains Tax as long as:
- It’s your only home and you’ve lived in it as your main home since you bought it.
- you haven’t let part of it out - this doesn’t include having a single lodger
- you haven’t used part of it for business only
- the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
- you didn’t buy it just to make a gain
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