Downsizing after 50: could a smaller home leave you better off?

Summer has always been peak moving season for students. But this year is a little different. Since the Renters’ Rights Act came into force, the student lettings market has been shaken up, leaving some landlords with unexpected void periods, disrupted income and a lot of questions. Because while most areas of the private rented sector have absorbed the changes, student lets is one of the most impacted areas.

Key takeaways

• Many people choose to move after retirement, when children have left home, or when maintaining a larger property no longer feels practical.

• Downsizing can be an opportunity to move closer to family, amenities or the lifestyle you want now.

• Don't forget to review your home insurance when you move, as your cover needs may change.

Is it time to downsize?

If you've lived in the same home for many years, the idea of moving can feel overwhelming. But for many, downsizing is less about giving something up and more about gaining something new.

Maybe you have spare bedrooms that rarely get used, a garden that's becoming harder to maintain, or a property that's simply bigger than you need. A smaller home can offer a fresh start and often makes day-to-day life easier.

Common reasons people choose to downsize include:

• Children leaving home

• Retirement and changing income needs

• Reducing household expenses

• Health or mobility problems

• Moving closer to family and friends

• Finding a more manageable property for the future

• Choosing a new lifestyle, whether that's by the coast, in a town centre or somewhere completely different

The benefits of downsizing

For many people, downsizing is about creating more freedom. A smaller home can often reduce day-to-day costs, from energy bills and maintenance to council tax and general upkeep. And if you're moving from a larger property, you may also be able to release some of the value tied up in your home, giving you more financial flexibility later in life.

That extra money could help fund retirement plans, support family members, pay for home improvements or simply provide greater peace of mind. But you need to consider your finances carefully.

Andy Shaw, Director – Head of Later Life Lending at SPF Private Clients, says: “Downsizing can free up money from your property, but research shows that many retirees discover it isn’t enough. There can be a lack of suitable housing stock for older people who are downsizing and it’s not always in areas where they want to live. Once all the costs are considered, there often isn’t enough cash left to buy a new property outright in the area you want to live in and have enough money left for a comfortable lifestyle.

“For example, if you sell up, repay any outstanding mortgage and plan to buy a new home for £400,000 in cash, as that is all you can afford once costs are taken into account, you may find you can’t afford something in the area in which you want to live.

“But a mortgage broker can help with a mortgage on top of the cash you put down. You may be able to borrow another, £100,000, taking you to £500,000 and providing you a larger budget for relocating. In this sense a lifetime mortgage, aimed at the over-55s, allows you to borrow money on a lifetime basis. It doesn't have to be repaid until death or moving into long-term care and can support a future purchase, rather than just being a product that enables you to stay in your existing home.

“There are also a greater number of mainstream mortgage options for older borrowers, as well as retirement interest-only (RIO) mortgages, predominantly available from some of the lesser-known building societies. You might not come across these from day to day, which is where a whole-of-market broker who has access to such products can help.

“Bridging finance might be another option worth exploring if you’re not selling your existing home and buying a new one simultaneously. A bridging loan gives you a 12-month deadline, during which you’ll need to sell your existing residence to repay the debt, and can enable you to jump to the front of the queue for potential properties as you are effectively chain-free. Given how few houses there are for downsizers, this can be an important advantage.

“It’s worth bearing in mind that once you have downsized, but used cash, you may still be able to take out lifetime mortgage for the purchase, so long as the property is suitable. This can be useful if you find out that you haven’t got as much money as you anticipated or will need to support your lifestyle. However, if you bought a retirement property you will find your mortgage options extremely limited.

“In summary, there are a good number of options available for lending in later life but talking to a broker as early as possible in the process to understand your options.”

It's important to factor in moving costs when weighing up your options. Estate agent fees, legal costs, surveys, removals and any Stamp Duty payable on your new property can all affect the overall financial picture.

Moving home is also the ideal time to review your insurance arrangements. Your new property may need a different level of contents cover, and if you're moving to a leasehold flat or retirement development, your buildings insurance requirements could change too.

A quick review, especially with an expert broker like Howden, can help make sure you're protected without paying for cover you no longer need.

You don't have to navigate the practicalities alone, either. From mortgage advice to making sure your new home is properly protected, having the right people around you can make the process much smoother.

That's where Howden and SPF can help. While SPF can support your mortgage and lending advice, we'll help make sure your insurance keeps pace with the changes. Whether you're moving to a smaller house, a flat or a retirement property, we'll help you understand what cover you need and where you could avoid paying for insurance you no longer require.

Because moving home is a big change. Having a team that can guide you through it makes all the difference. Simply give your local Howden branch a call or drop in for a free insurance review, and we'll make sure your cover is right for this next chapter.

Sources: Age UK, Property Passport, SPF