Should we downsize?

The inspiration for this blog post came from a conversation that one of our team recently had with their parents. Vicky had suggested to her mum and dad that maybe it’s time to downsize now that it’s just the two of them living in a big detached four-bedroom home.

As a team, we began to discuss the difference in people’s views on downsizing. As an Estate Agent, we see how homeowners benefit from downsizing, they often are financially better off and enjoy a better standard of living with more disposable income and a smaller space to maintain. As a homeowner, Vicky’s mum was worried about where they would move that still had everything they wanted from a home; a good area, detached property and space for the grandkids. It showed us that there are several pros and cons to downsizing but that if the circumstances were right then it could be the perfect option.

What are the pros of downsizing?

Selling your home and moving to a less expensive property can raise money to spend on your new lifestyle or help a family member. A smaller property also means smaller bills and fewer maintenance costs.

Downsizing is the opportunity to move somewhere that is easy to manage. Less maintenance, cleaning and unused space help you maintain independent living.

If you’re downsizing later in life you can choose a property that is better suited to your needs.

What are the cons of downsizing?

When moving to a smaller home you’ll need to consider if that space works for you and your lifestyle. Consider how much space you need for hobbies, family and your belongings.

Will you be ok leaving your friends and neighbours behind? Many of us create relationships with our neighbours and have a strong network of people around where we live.

You should only downsize if it is truly the right decision for you. You must feel comfortable in your choice of a new home and shouldn’t be pressurised by family members or society suggesting it’s the right next move.

Will downsizing affect my children’s inheritance?

The inheritance tax in 2022-2023 is £325,000, which means that no inheritance tax is charged on the first £325,000 that you leave to your heirs. By owning your own home your estate can benefit from an extra inheritance tax allowance of up to £175,000.

If you’re concerned that downsizing to a less valuable home will mean that your heirs lose out on some or all of this extra tax-free allowance then look into the rules of ‘downsizing addition'. The rules can often be complex but it means that your estate can benefit from the full extra allowance even if you have downsized or disposed of your property.

What are your options if you downsize?

You could buy a smaller property and remain on the property ladder, owning your own home brings a sense of security but this is obviously a long-term commitment so make sure you research the area and type of home you choose.

You could try out a new location or a different style of home by renting. Rental agreements are usually fixed for an initial 6 or 12-month contract allowing you time to decide what your next move will be.

To fully enjoy your retirement you may decide to look at retirement villages or accessible homes that offer you a certain level of independence in a safer environment with people of a similar age.

As we found from our discussion downsizing isn’t a simple decision to make but our team is on hand to help you navigate your way through selling your home or buying a new smaller property. If you would like a market-led free valuation to see just how much your home is worth call our team on 01633 870777.