Should you move to a smaller property in retirement?

Retirement should be about making the most from life now you have the time. But it’s also when your financial situation could change. Your income is likely to fall and, with the rising cost of living, many start to feel that the dream retirement is out of their financial reach and downsizing is the only option.

For some, downsizing can deliver huge financial and practical benefits – not just now, but for the future. Moving to a smaller property can often free up funds, but also mean lower monthly household bills.

Maybe you’ve thought of moving to a property that’s easier to manage as you get older. A home that you bought 20 years ago, might be more challenging now to move around in.

While there’s no doubt that downsizing is one option for freeing up finances in later life, it’s a move that should be thought about carefully.
 
Finding a suitable property
Downsizing isn’t always simply about finding a smaller property – it needs to be right for you too not just now, but also in 10 or 20 years’ time.

While around one in three homeowners will consider downsizing in the next five years*, Key’s study shows they had a range of concerns including not being financially better off by downsizing, not being able to move because of the costs involved and wanting to, but being unable to find a suitable property to move into.
 
Adding up the cost
While downsizing can free up funds, there are other financial considerations to factor in when moving, such as estate agent fees, survey and solicitor fees.

Other expenses include stamp duty and removal costs. Turning your new house into a home – renovating a bathroom, clearing a garden or simply redecorating - can also eat away into your finances.

Of course, finances aside, there is the emotional side of downsizing to consider. Leaving the family home or moving away from friends can also be a wrench, particularly in retirement when there’s now the time to spend in the garden or with grandchildren in your home.
 
Another way
Downsizing and leaving the home you love isn’t the only option when it comes to having more cash in retirement. A lifetime mortgage, the most popular form of equity release and a loan secured against your home, allows you to unlock some of the tax-free cash from your home while staying put.

And, with Key Equity Release plans there are typically no monthly repayments to make as the loan, plus roll up interest, is repaid when the plan comes to an end.

Available to homeowners over 55, after years of working hard to make monthly repayments, your home is likely to be your biggest asset, particularly if you’ve benefitted from an increase in house prices over the past few decades.
 
Downsizing protection
Just because you take out equity release, doesn’t mean you can’t downsize in the future either. With some Key Equity Release plans if, for any reason, you need to move to a smaller home after five years of taking out a lifetime mortgage, you can pay the loan back early without incurring an early repayment charge if the new property does not meet the lender’s criteria.

If you’re considering equity release, we recommend that you read Is it right for you? carefully before going ahead.
 
Equity release will reduce the value of your estate, and could also affect your entitlement to means-tested benefits. A lifetime mortgage is a loan secured against your home.
 
We all have questions
When it comes to equity release, we all have questions. At Key Equity Release, we believe the first thing to work out is whether equity release is actually right for you. We’ll discuss your options with you, including downsizing or using other forms of borrowing, and if equity release isn’t right for you, we’ll tell you.
 
* Research conducted by independent researchers Consumer Intelligence among a sample of 502 homeowners aged 65 between May 17^th and June 4^th 2018