To not understand downsizing as a means to release cash?

[Shinynose]

I live in a 4 bed detached house and now DC are adults it's too big and requires too much maintenance, so that's a good reason to downsize.

However, people often talk of downsizing as a way to fund their retirement or help DC with house purchases of their own. I can't make the maths work.

My house is worth about £500k, a not insignificant sum. It's in The South East but in a cheaper part, in the slightly nicer part of a not that nice town.

This "nice" bit doesn't really have smaller houses, for something smaller it would have to be a bungalow, which would cost about the same, possibly more than my current house.

I could move back to where my first house was, a 3 bed terraced ex council house, but that would cost £350k and after costs would raise maybe £100k (?), a lot of money but not a lot to live on for very long, and a significant reduction in quality of life.

Is this kind of downsizing only for people who live in very expensive areas and who are prepared to move a long way from home? Or am I missing something?

I disagree, its a need. We are really poor in our country at recognising that

Using capitals doesnt change that

Yes, we looked into these for my MIL. She ended up staying in her home with carers. Financially it was much better for her.

If she already needed carers she was probably past the point where a retirement home with on site social activities makes good sense.

My parents downsized very well I think:

1. When dad was about 65 (2005) they moved from a 3-4 bed house to a 2 bed bungalow. Did it up how they liked and enjoyed life. Not sure how much this released cash wise - probably not much - but the lower maintenance time and running costs were the driver.

1. When Dad was 73 and wanted to forget about maintenance altogether, they sold the bungalow and bought a 2 bed ground floor retirement flat with own front door and patio at the back. Met lots of similar aged folks to socialise with. When they sold 5 years later (2013) I had started to get involved with looking after their finances. As well as the service charge of £140 a month there was a clause in the contract that they had to pay 1/2% for every year they lived there to the freeholder. They sold for £91k (bought for £78k) so that was £2.3k to pay.

1. When Dad was 78 and starting to have health issues they sold the retirement flat and rented a 2 bed flat in a Housing 21 extra care facility. Rent not too bad as it was up north and a housing association type owner. Rent included heating and hot water. On site management, cafe, hairdresser and church, gardens, communal lounges for social activities (there were lots) and a guest suite for visitors which was £10 a night to rent. And most importantly an on-site team of carers with little staff turnover who they could engage more and more as they needed them. Dad lived there till he died. Mum who had dementia then needed to move into a care home.

All the properties were within about a 2 mile radius of the 3-4 bed house in a town up north so easy to keep in touch with friends, keep same Dr and opticians etc.

People will no doubt be aghast at the service charge and lease clause in step 2 and that they rented for 5 years at step 3 but they really enjoyed living in each place and it was the right type of place for each stage of their life. What more could you want for your twilight years?

Good friends don’t care about locations, and if you have hobbies you can continue that in a new area and make new friends.

People move their lives all the time, it’s not that big a deal really.

As someone who will never own their own home my perspective would be that it’s not just about the lump sum tied up in the property but also the ongoing costs of running that property… heating, water, maintenance. You’d free up regular money by having a smaller home which would impact on your daily quality of life.

You won't get your Freedom Pass till 66 now. Hope that doesn't upset your plan too much.

My mother's and MIL's quality of life is about staying in their own homes. Neither would want to live communally, wandering corridors, with bingo on Tuesdays, dining areas and organised entertainment. MIL is more of a loner, mother has her bridge, her coffee ladies and a social life. That sort of living would likely hasten their deterioration and frankly if money were tight I think I'd rather buy a souped up residential park type home.

They can stay in their own homes. MIL has a "carer" who goes in at lunchtime, checks on her and makes sure she has a hot meal. That will increase as necessary and she will stay in her own home with 24/7 carers if necessary. DH has PoA and she and we have the money.

For the pp above who thought they would sell a house for 900k, buy a flat for 500k and have 400k to spare. That isn't quite so. £900k x 5% is £45k. It costs about that to move so more like £350k.

We had a 4 bed semi but no parking. We sold it, bought a 3 bed semi with off road parking and ended up with nothing, we had to pay more!

It works because normally a smaller property is cheaper and people often move areas.

Have you had your house valued recently? That’s a starting point. I’m planning on downsizing. Family home worth £825k lush apartment, in town centre, with parking and a lift is half that, may even look at retirement properties, Mcarthy and Stone seem ok.

@RosesandHellebores and yet you couched your response in terms of protecting Mils/parents money, not their quality of life.

Yes but from the perspective that it will.cost as much if not more for them to stay in their own homes.. It's also the way my mind works.

MIL presently has a gardener, a carer, and DH had a downstairs shower and lavatory fitted when the kitchen was remodelled when FIL died 15 years ago. She wouldn't cope with that upheaval now.

If she had needed the money a two bed flat in a good block would have made more sense than a retirement complex. She's in a three bed semi.

We live in a 4 bed detached in the NW. Our nearest town is on the sea, and is known for people retiring to it as it is flat. There are lots of bungalows and retirement flats, and we are at an age where we are considering downsizing. But. Bungalows are expensive, or have been extended into the roof space, defeating the purpose of a bungalow for retirement when stairs become a challenge. Retirement flats come with high service charges, and can be expensive. Many also have short leases, meaning they face huge losses when it comes to sell. The inlaws moved to a 2 bed retirement flat with 80 years on the lease, costing £120k. When they moved out there was about 65 years left making it almost unmortgagable, not a problem in itself, as most buyers are downsizing and don't need a mortgage, but it still resulted in them selling for a £50k loss. Loss partly due to the lease, and partly due to over supply of new flats, that looked more modern, longer lease, lots of marketing by the developers. So, we are looking at non retirement flats, but good ones cost as much as our house, and still come with service charges, and similar council tax banding as our house, so there will be no saving. It is a dilemma.

Before you jump into MaCarthy and Stone, check all the extra costs, especially charges when you sell.

Brilliant while you are alive but difficult to sell after death.

Less of a problem if there's more in the estate but hard on those who inherit a property only costing them hundreds a month in service charges.

Of course some are better than others but there's been quite a scandal around them as the charges don't reduce after death in some, even when it's for meals or care - and the value tends to plummet.

Reading other comments, we are also looking at renting. Some of the retirement blocks rent a proportion. My DM ended up in a nice rented flat, and as they had taken out equity release on the family home 25 years before they sold it, they had no equity left when was died and she sold up, so her costs were all paid by benefits. It worked well for her, when she was on her own.

You obviously dont understand something because its not relevant to you. Downsizing to release equity works if you have alot of equity and are buying a much cheaper house. If thats not relevant for you then I dont understand the point of your post.
Im in north west England and we have a real variety of house sizes and prices even within 5 minutes of us. Im in a 4 bed semi worth around 350k, but 10 minutes away we have millionaires row with mansions worth 2 / 3 million. 5 minutes in the other direction we have 2 bed semis or bungalows for 150k. It makes sense to downsize for the equity when you have choice and will actually release equity. Its not that difficult to understand. You dont want to move away from your area, but many dont have to do that and can still downsize in their home town.

If they plummet in value after someone dies they must be quite cheap to buy in the first place no? Because they pass from person to person as the last incumbent dies/requires a nursing home.

As for being tough on those that inherit, well no one has to accept an inheritance, you can just turn it down.

I think what you are trying to say is that it's an arrangement that can result in less money being avaliable for inheritance than living alone in your original home might. Which is true enough but maybe not be a prime consideration for many people, or their relatives.

We downsized a few years ago from a large period house to a new build. Releasing cash wasn’t the main objective (though we did) but rather reducing the worry of big maintenance bills, jobs we could no longer tackle ourselves, and astronomical energy costs.

i think you have to be prepared to make a big step down and accept that you will live differently.

If your not struggling financially, could you adapt your home to your needs, hire assistance in maintaining your home? Cleaner, handy man etc
That's what I would look into. Depending on the struggles and finances there are different routes you could go down.

I don't think downsizing works unless a drastic change in area/property. There are a lot of hidden costs. Even to a flat with maintenance costs.

TfL website says you get free travel from 60 with a London Oyster photocard.

"If you're 60 or over and live in a London borough, you can get a 60+ London Oyster photocard until you're eligible for a Freedom Pass."

I don't know what the difference between the two is but I still get free travel from 60 so, no, hasn't upset my plat at all :)

I never thought this when I read that post I did really 😁

I have friends who downsized into a 3 bed semi as the bungalows were too expensive. They still have room for their daughter to stay (no grandkids).

I agree though, downsizing is mainly to make your living costs cheaper- bills etc.

You make a new life.

The south is for working, the north is for retiring.

Hello everyone, just so you are aware this thread was started by a previously banned poster. However given it has gained some traction we are letting it run for now. We have shown the OP the door.
MNHQ

Parents sold their 4 bed detached in the south east for around £700k and bought a 3 bed ground floor flat with garden for around £450,000. They were almost mortgage free so paid that off and now have the difference (less the moving costs). It's helped them with bits and pieces. I suppose with a larger mortgage paid off you'd be better off month on month too. Even with those figures it's not financially life changing for many. But they did it to make sure they'll living somewhere they can cope with as they get older and not so much for the financial benefits