Is downsizing the right option for you?

If you’re looking to free up some cash to spend during your retirement, then downsizing might be an appealing option. This is the practice of selling a larger home in order to move into a smaller one. Having pocketed the difference, you’ll have plenty of extra funds to spend on your priorities – whether it’s a series of amazing holidays, or a new Ferarri.

Why many people consider downsizing

Downsizing is a popular option for a range of reasons.

In many cases, the existing house will be too big for the current needs of the occupants. A few decades ago, the extra space might have been taken up by children – but once those children grow up and move out, the house can end up feeling that little bit empty.

If the house is now mortgage-free, then you might be free to sell it and keep the profits in their entirety. Or, you might become mortgage-free via the same process. This would allow you to save on interest – though you might incur early-repayment charges in the case of some mortgages.

Finally, we should say that smaller houses tend to be not only cheaper to buy, but cheaper to run. If you’re spending a lot on heating a large space, and you’re only really using a small chunk of that space, then downsizing probably makes sense.

Considering downsizing vs making the move

All of the arguments for downsizing are persuasive. But there’s a big difference between merely thinking that it’s a good idea, and actually doing it. Some of us have sentimental ties to our existing homes, which might keep us in position, even if it doesn’t make financial sense.

According to research from Key Advice, around 29% of over-45s are considering downsizing, while 70% would rather stay in their existing homes for the rest of their lives. Despite this, just 13% of those over 75 actually make the leap.

What might be affecting people’s decision to move

The same research picks out a few distinct motives for downsizing. Just under one in five respondents claimed that the cost of living crisis was pushing them into the move. 8% wanted cash to support their families, and 5% needed help with debt repayments. More popular reasons were easier upkeep (43%) and reduced costs (38%).

However, there were a few compelling reasons to stay put, too. You might already feel embedded into the community. You might have happy memories of your existing home. You might feel confident and secure, and reassured that you know how everything works. To make a move risks disrupting all of this.

Moving might not be the only option

If you’re tempted to downsize, but don’t actually want to go through the hassle of moving, then there are alternatives to consider. You might look at an equity release calculator, and see how much you could earn. Just be aware of the costs in the long term, and weigh them against the ones that might be imposed by downsizing.