The benefits and drawbacks of downsizing to a smaller home
Downsizing your home is a big step, but for many, it can be beneficial and sometimes even essential. Homeowners often find themselves at a crossroads when they experience a significant lifestyle change, that leaves them with a house that is too big for their needs or abilities. A smaller home nearer to loved ones or more comfortable to navigate can seem like a natural choice. In this article, we will look into the reasons why people downsize and also the advantages and disadvantages to consider. We will also show you how you can downsize quickly without getting caught up in a property chain.
Reasons to downsize
- Equity Release
There are two main reasons why homeowners would want to access the equity in their property, retirement and financial necessity. When homeowners reach retirement age, they find themselves with the freedom to fill their lives as they please. In this situation, they may want to take some value out of their property to enjoy things like holidays. Those downsizing due to financial necessity, are likely to need the equity to pay off any debts and find a property with more manageable living costs, to reduce their outgoings.
- Age / Disability
For some, it may be that the challenges of looking after a large property are no longer feasible. Mobility issues can increase the need for stairless properties such as bungalows, and create a need to be closer to friends, family, work, shops and hospitals for easier access to care and facilities.
- Unoccupied space (empty nest)
When children have grown up and moved out, it creates a lot of empty rooms, rooms that begin to collect dust or take time and money to keep clean.
- Emotional Cleanse
When people experience an emotional tragedy such as bereavement, divorce or break up, they may find that their large house acts as a constant reminder. They may choose to relocate to a smaller property elsewhere in an attempt to heal themselves emotionally and mentally.
- Area upgrade
You may be interested in downsizing so that you can move to a smaller but nicer house in a more affluent area. Look into areas with good local schools, close community, ample shopping and entrainment as well as street cleanliness, and low clime rates.
The advantages of downsizing?
Aside from the possibility of getting out of stamp duty when you buy and avoiding passing on inheritance tax when you’re gone, here is an extensive list of all the possible benefits you could receive when you choose to downsize.
- Reduce outgoings (lower bills)
Being in a smaller property naturally means lower bills, less gas, electric and water, not to mention lower council tax and home insurance.
- Pay off mortgage & debts
With the released equity, you can pay off any outstanding balances on mortgages, loans, credit cards, financed purchases and any other obligations.
- Greater disposable income
Use the money to enjoy your life and create memories. Go on holidays or cruises, buy a caravan or motor home, join a club or find a hobby.
- Financial Freedom
Releasing the equity in your household and downsizing gives you the financial freedom to choose what you want to do next. You can change your career, start a business, take some time off or even retire altogether.
- Easier & Cheaper property maintenance
You no longer need to put time, effort and finances into cleaning and maintaining spaces that are either no longer or rarely used. Smaller properties are also usually cheaper to repair when things go wrong.
- Comfortable living
If you choose to retire early or take some time off, the money can help you live comfortably. Smaller rooms are much more cosy and warm quickly & live in comfort during as you age.
- Reduce carbon footprint
Smaller properties require less energy, which means the consumption of fewer resources. This is especially true for modern properties and tiny homes, that are well known for being environmentally friendly, thanks to advanced insulation and efficient central heating systems.
- Re-gifting space
Larger families would enjoy and appreciate a bigger property and make better use of the rooms. Allow other families to make new treasured memories.
- Maintain independence
Having a low maintenance property means that you can look after your home and yourselves for longer when mobility becomes an issue. You can even put the money into making the property senior-friendly, or allocate some for live-in care or an assisted living.
The disadvantages of downsizing?
While there are a lot of disadvantages or risks to moving, we aim to focus only on those that are relevant to downsizing.
- Less space
The most obvious drawback to downsizing is just the reduction of space. For many, floor space and even ceiling height is very important when it comes to comfort, happiness and clarity of mind. There is also limited storage, so the space you are in could become more cluttered.
- Cannot entertain guests
Depending on how small your new property is, you may find it more of a challenge hosting guests both for daytime events and overnight, which can also have an impact on your social life
- Selling off belongings
You will find yourself having to part with many items that you have developed an emotional attachment to simply because you may not have space. You may also make a loss on some of your belongings as you need them gone asap or
- Change of lifestyle
You may find that you need to change how you spend your spare time, especially if for example you used to have a pool table or home gym. You may also need to change your shopping habits as storage, floor space and display surfaces will be limited.
- Small doesn’t necessarily mean cheap
Be careful that the move you are making isn’t going to cost you more in the long run. The property may need more work, or the living costs of the area could mean the released funds disappear quicker than expected or planned.
Overall, when done right, downsizing might be the best decision you ever made! Just make sure you seek guidance from a financial advisor to make sure it will not only benefit you financially but also make you happier. Be confident that it will improve your life.
Help with downsizing
For most, moving house can be stressful, and the possibility of a house sale falling through or a break in the property chain can make downsizing seem unmanageable. A short term bridging loan could be the solution for getting a large loan quickly, as we can get you a quote in just a few minutes and the money in your account in just 2 – 3 weeks.
Friends capital offer the best rates on the market, and you don’t have to pay us anything until your current property sells or the loan term ends. Contact us today to apply for a bridging loan and speak with one of our financial experts.