Downsizing Can Equate To The Cost Of Two Cruises
Many people approaching retirement think about the possibility of downsizing to a smaller property as a way of releasing additional cash to supplement their income. After all, if they have lived in a large family home for many years, the chances are that, thanks to the continuing rise in house prices, they could have built up a considerable amount of equity.
However, according to recent research1, it can cost nearly 5% of the value of the property, equating to as much as two luxury holidays to make that move. In England, it’s estimated that the average cost of downsizing is £17,483, more than the price of two Caribbean cruises for two. These figures are based on selling a family home at an average price of £381,211, and buying a two-bedroom apartment at an average price of £268,174.
The costs included in the calculation are estate agency fees, stamp duty and legal fees. It also allowed for a homebuyer’s report and removal costs.
Downsizing For A Pension
It’s estimated that around three million homeowners are currently relying on downsizing their home to fund their pension. This strategy could be set to fail, not least because the amount raised may not fund sufficient income for your retirement needs. In addition, many people approaching retirement may have mortgage debt outstanding, or have family members still living at home. With the state pension age gradually increasing, and more people opting out of choice or necessity to work on past their normal retirement date, downsizing may not be a viable option. Plus, this strategy assumes that it’s easy to find a suitable smaller property, and this is not a given.
Former pensions minister Steve Webb, believes that: “Hoping to live purely off the value of your home could be a ‘downsizing delusion’ for millions of people.”
Making provision for your retirement requires thought and planning; seeking advice will ensure you have suitable plans in place.