As life moves on, priorities change – what was once the perfect home for your and your family might now not fit your needs. Whether your financial situation has changed or your children have flown the nest, downsizing could be the ideal solution. Moving to a smaller property could provide positive changes from a lifestyle and financial point of view.
What is the cost of downsizing your home?
One of the biggest considerations for downsizing a home is the cost of living in the property. When larger houses are no longer needed, it can make sense to downsize to a smaller property that is more affordable.
However, there are costs to downsizing which should be factored into any decisions you make. As always with matters of property, it’s essential to seek professional financial advice when considering whether to downsize.
Downsizing and stamp duty
Stamp Duty Land Tax (SDLT) is paid on increasing portions of the property price when you buy residential property over £250,000. The amount you will pay depends on factors such as when you bought the property, how much you paid for it and if you’re eligible for an exemption.
If you own only one residential property, you can expect to pay SDLT at the following rates:
- Up to £250,000 – 0%
- The next £675,000 (the portion from £250,001 to £925,000) – 5%
- The next £575,000 (the portion from £925,001 to £1.5 million) – 10%
- The remaining amount (the portion above £1.5 million) – 12%
However, if you own more than one residential property, you usually pay 3% on top of these rates. This is essential to consider when downsizing your house as if there is any crossover with selling your previous home and buying your downsized home, you’ll need to pay higher rates as you will technically own two properties.
If you sell your previous main home within 36 months, you will be able to apply for a refund, but this is still an important initial cost to factor in. Use the government’s SDLT calculator to figure out how much tax you can expect to pay when downsizing your home.
Other costs of downsizing
As well as stamp duty, it’s important to consider the other costs associated with moving house. As with any house sale, you should consider whether you are looking to sell your property through an estate agent, and if so, how much this will cost.
Discover how to choose an estate agent and the essential questions you should ask a prospective estate agent to be sure you’re making the best choice. Make sure you take care to check there’s no hidden extras such as photography and floorplans – these should be included in the cost.
Conveyancing is another cost that should be factored into your budget. While it is possible to be your own conveyancer, it is not advisable due to how complex the process can become. Using a professional conveyancer ensures that every step of the conveyancing process is conducted thoroughly and correctly.
Downsizing your home to save money is one of the main reasons why people make the move, but it’s important to factor in the costs that can be associated with doing so before committing.
Pros and cons of downsizing
As with every financial decision, there are positives and negatives to weigh up. What works for some people may not work for others, so take care to always consider your personal circumstances before deciding to downsize your home.
Benefits of downsizing
Downsizing can be a beneficial move in various situations. Some of the most common benefits of downsizing include:
- Cost savings – while there will be an initial expense associated with downsizing, downsizing is usually associated with lower rent or mortgage payments, as well as lower utility bills.
- Less maintenance – a smaller home means less space to keep clean and tidy, saving you time, effort and money on the upkeep of your home.
- Better energy efficiency – smaller homes tend to have a better energy efficiency, making them more environmentally friendly. Find out how to improve your EPC rating to ensure your property is as energy efficient as possible.
Drawbacks of downsizing
There are also some drawbacks of downsizing that need to be considered before committing to a move:
- Moving costs – from stamp duty and estate agent fees to mortgage fees, removal costs and conveyancing fees; costs can quickly stack up.
- Emotional and sentimental attachment – especially if you’ve lived in the property for a long time, some people find it difficult to leave the home where they have made memories.
- Less space – oftentimes, downsizing means you’ll have less space to store your belongings, meaning a declutter is necessary before the move.
Things to consider when you downsize
1. Decluttering is essential
The change of scenery and less space makes downsizing the perfect opportunity to declutter. Less items need less space to keep them, so sell, donate or pass on to family any items or clothing you no longer need.
2. Use smart storage solutions
Even with the best will in the world and after decluttering, odds are you’ll still have bits and bobs that need to be stored away in your downsized home. As you’ll be working with less space than what you’re used to, incorporating smart storage solutions is a must. One of the best ways to downsize your home is to incorporate hidden storage and built-in storage which can double as furniture or decoration.
3. Make a plan and measure up
It’s no easy feat to downsize, so having a plan in place about what you’re going to do and when makes all the difference. As part of this, measure up the space you’re moving into so you know exactly how much space you have to fit your belongings into.
Downsizing housing options
There are several options available to downsizers which all offer their own benefits. It might not be about space, could be moving to a less expensive area, here are some of the most common downsizing housing options include:
- Moving to a smaller property
- Renting a new property
- Switching to a bungalow
- Swapping to a flat
- Relocating to a less costly area
If you’ve taken the advice of a financial expert and decided to downsize, discover the properties for sale across south east London with Stanfords to find your perfect home.