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Published: 22/05/2019

Downsizing is becoming an increasingly popular way for many older homeowners to release cash from their home, while at the same time allowing them to move into a smaller, more manageable property. Yet unfortunately, new research shows that they may end up with less than they bargained for, as after the various costs of moving have been taken into account, the money left over may not be as substantial as they initially hoped.

That’s according to research from OneFamily, with its latest figures revealing that 43% of over-60s surveyed have moved to a different property in order to access capital tied up in their home – yet 24% of those end up with less money than expected, and 20% were disappointed with the overall return.

Escalating costs

The research found that downsizers end up with an average of £105,900 from the sale of their property, which may initially sound like a decent sum, but is actually £28,650 less than anticipated, largely the result of additional costs such as stamp duty, legal fees, moving and renovation costs eating into their overall profit. Indeed, 48% said that these costs were more expensive than initially thought, with this underestimation meaning downsizers typically overspent by an average of £12,480.

However, others also felt they’d make more from the sale of the property and felt short-changed as a result. The data shows that 10% of those who made less than expected from downsizing admitted they had to reduce the asking price thanks to difficult market conditions, while 57% accepted an offer that was lower than asking price. Those hoping to move in the future may even find it difficult to find a suitable property to move into, as although 41% hope to move into a bungalow, such properties are in short supply.

Little choice

Unfortunately, many homeowners felt they had no choice but to downsize – given that the average worker currently enters retirement with just £28,000 in pension savings, many need to access the cash tied up in their home to boost their retirement income, something that 20% of respondents admitted to. Of these, 25% were sad to leave their old home behind, and 13% would have preferred to stay put, highlighting the difficulty many retirees face in making this kind of decision.

Yet it could be a decision they don’t have to make, as there are alternatives to downsizing that mean they’re able to stay in their home while boosting their retirement income at the same time – and a lifetime mortgage is one of them.

Release equity without moving home

Lifetime mortgages – otherwise known as equity release – can be a great way for older homeowners to release some of the cash tied up in their home, all without needing to move to a smaller property. You can release a certain percentage of the value of your home – the amount of which typically depends on your age – without having to make any repayments; it’s still a loan, but is paid back on sale of the property, with interest “rolling up” until that point (some plans will allow you to make repayments during the term of the loan, though this will need to be discussed with your potential provider).

Equity release is growing in popularity as a way for retirees to fund their retirement, yet of those who recently downsized, 31% said they weren’t aware that a lifetime mortgage was an option, suggesting that even more could benefit if given the opportunity.  

“It’s great that many people now have longer active retirements, however they come at a cost and many pensions won’t stretch far enough,” said Nici Audhlam-Gardiner, managing director of Lifetime Mortgages at OneFamily. “Many retirees feel they have no choice but to downsize, but there are different ways of releasing capital to help fund later years.

“A lifetime mortgage allows homeowners to access the wealth tied up in their home, delivering a cash lump sum without having to move. They can spend the money on whatever they please, be that renovations to their property, paying for day-to-day living costs or helping out younger family members financially. The most important thing is that over-60s understand the various options available to them so they can make the best decisions for their retirement and don’t feel forced into selling their homes unnecessarily.”

What next?

Want to know more about equity release? You’re in the right place! You can find out more by reading our guide, or can jump straight in by contacting our equity release advice service to see if it could be an option for you.


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