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The cost of downsizing

Your Money
Sunday 01 October 2017
While downsizing is often considered as a way to reduce household bills or improve retirement finances, it's something that should be approached with a little care.

It's important to make sure that you've considered how much downsizing might actually cost you in the short term. These expenses can often run to more than you initially expected! 

There is also another big cost associated with downsizing - although not a financial one - and that's the loss of your family home. If you have a strong sentimental attachment to your home then you may find that this is the true cost of downsizing!

Financial considerations

For many people, downsizing is a sensible option - and if you're looking to improve your retirement finances then it is important to explore all the options. However, it's also worth considering the upfront costs, including...
  • Agency fees. You might have to pay an estate agent for managing the details of the move.
  • Legal fees and a valuation fee.
  • Stamp duty. This is paid on any property costing £125,001 or more. The rate will vary depending on purchase price; you can use this calculator to see how much stamp duty would be for houses at different values.
  • Maintenance and improvement. When you buy the property, it may need repair work - and it's far too easy to underestimate what this will cost!

Sentimental value

Of course, when most people look at their home they see more than bricks, mortar and a valuation figure! You may have already spent time and energy creating a homely space that feels right to you, for instance, and that's something which is difficult to replicate in a brand new property. It can also be hard to move away from the memories that are stored up in your existing home. 

Downsizing can also sometimes mean moving to a cheaper area, and this can be particularly disruptive - especially if it means moving away from family and friends who live close by.

Once all these factors have been taken into consideration, downsizing may not be as attractive as it first seems. Depending on your motivation for moving, you may want to look into alternatives. One thing that you may want to consider if you are over the age of 55 is equity release. Equity release alows you to release tax-free cash without having to relocate.

Of course, as with downsizing you should also consider the associated costs. These may include:
  • An arrangement fee
  • An advice fee
  • Legal costs
Your equity release adviser will discuss this with you in more detail. 

The most popular type of equity release is a lifetime mortgage, which is a loan secured against your home. Equity release will reduce the value of your estate, and can affect you entitlement to means-tested benefits. It's important, then, to weigh up your options carefully. 

We recommend that anybody considering equity release reads 'is it right for you?' carefully before going ahead. 

Unless you decide to go ahead, Key's service is completely free of charge as our fixed advice fee of £1,299 is only payable on completion of a plan.
Page last updated: Tuesday 16 April 2024