Downsizing, for many years, has been seen as the best way to release equity from your home. And for some, it still is.
Selling up your larger, usually family home in pursuit of a more cost-effective residence while pocketing some extra cash in the process seems like a win-win.
However, while the profits can be handsome, particularly if there is no mortgage left to pay, there are significant financial implications to think about, as well as emotional ones.
Recent research has indicated that those who downsize incur costs of an average of almost £29,000 over the process due to moving charges, which include bills and fees*.
And that figure could comfortably rise.
Stamp duty, estate agent fees, surveys, legal costs, removal fees and refurbishment costs are just some of the outlays when moving to a smaller home.
But just because the new property may be a downsizing in space, it’s not necessarily mirrored in cost.
Moving into a two-bed bungalow, for example, may be more expensive** than a house or flat with the same number of bedrooms, simply due to the lack of availability. And when switching postcodes, those six or seven letters and numbers can make a world of difference.
Yet it’s not just the financial implications downsizing possesses which must be considered, but also emotional.
Leaving the family home behind can be a daunting task. Every home has a story to tell, and cutting ties with history can be too much for some.
Add on that downsizing may mean moving further away from immediate family and friends, and the decision to relinquish such surroundings for cash may not be as easy to make.
Of course, many embrace the opportunity for change and prosper in new surroundings. And they are more than happy to go through the often long-winded and stressful process of moving home to do so.
But some are not.
And for those, equity release could provide a solution.
Avoiding leaving memories behind, maintaining relationships with those close by, all the while releasing tax-fee cash to spend as you wish; it’s an option which has now become part of a strategic financial plan for those over 55.
It’s a big decision to make, though, so it’s imperative you seek independent, whole-of-the-market advice from an expert, accredited adviser to see which option is best for your bespoke situation.
Equity release is not for everyone. And here at Key, we know that. Which is why if it’s not the right path for you, we will tell you.
Downsizing may still be your best option, but make sure you have sought advice before coming to a decision.
Good advice is Key.
If you’re considering equity release we recommend that you read is it right for you?
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
The most popular type of equity release is a lifetime mortgage. A lifetime mortgage is secured against your home.
Unless you decide to go ahead, Key’s service is completely free of charge, as our usual advice fee of 1.99% of the amount released would only be payable on completion of a plan, subject to a minimum advice fee of £1,499.