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 live in a 4 bed detached worth about £400k. A two up two down terrace next door but one has just sold for £110k. I suspect that's how downsizing is supposed to work in a lot of areas.

It could also involve moving out of school catchment areas and so losing that premium - less than a mile away from my house I could buy a terrace for £60k.

If you want to downsize to free up cash, you need to compromise on where you want to live. A little flat, or moving area.

Most people do it for the actual reason of a smaller property though no? Cheaper to maintain, run, easier to maintain and walk around etc. And the cash thing is just a bonus.

MIL lives in the kind of area, Surrey, where relocating could release a lot of capital. If she sold her 3 bed house it would release 600k and then she could buy a comparable property near us oop North for 250k. The cheapest house in our town though the area is not very salubrious is 160k.

To downsize does mean moving though and all the faff, other investing over time can do better especially now. Property for ages was the way though, I remember ISA rates being 1%. I have at least 275k probably more like 300k that has been totally unearned sitting in my house. That’s from 1999 to present day. Prices have risen by 300% where I live, it’s insane quite frankly and not sustainable.

I think having anything in life and then going down is hard. To go from a detached back to a terrace sounds difficult. A bit like having a lovely hairdresser and then having to dye your hair at home. that’s was one of my things when younger I wanted to be able to always afford a good hairdresser and never have to dye my hair at home, well bugger me I became allergic to hair dye so I suddenly saved 1k a year.

Diversifying income streams and pots and spreading risk is always the best way.

I’m in the north east. We sold our house for £625k and intended spending £250k but couldn’t find anything so after two years of living in a depressing apartment we paid £400k for a bungalow two roads from where we sold originally.

Having said that, we love where we are and it’s released enough for us. Our main reason for downsizing was to reduce work in and maintaining the house and garden and that’s what we’ve got.

we also have a lot of people selling up in the South and moving to our town for coastal living.

There are far too many variables to give a one-size-fits-all answer to this...I live in a ground floor 2-bed purpose-built maisonette, worth about £150K. It's a decent road in a good area. Across the street 3-bedroom semis are going for about £300K, and there's a 5 bedroom on the market for over £500K. Anyone wanting to downsize their house on my road and release cash could easily do so.

I’m doing it for a couple of reasons. No mortgage, lower running costs mean I can work less than full time. I also want to gift my two DC cash for a deposit on a flat when they get to that stage.

It works fine for people like the couple I read about, a few years ago - sold their family house in Richmond (Surrey) for IIRC £2.5m, bought a 3 bed flat with 2 balconies overlooking Bushy Park for around £1.2 IIRC.
They got rid of their dog (it didn’t fit their new lifestyle) which made me say very rude things about them.

OP is right, in many areas anyway, including mine. Anyone selling a modest family home will have a job to find anything much cheaper, except one of the 2 bed flats targeted at ‘young professionals’ - with very likely a kitchen crammed in at one end of the living room and nowhere to put anything.

My neighbour is living in a 4 bed house she can’t afford to maintain. It desperately needs rewiring, new windows and doors, new bathroom, new kitchen, basically refurb top to bottom.

So she’s sat in a freezing cold, miserable house with no means to pay bills, or fix her leaking taps and the damp from the condensation.

because of the state of it if she sells she’ll
likely not have much change after moving costs for a 2 bed flat or terrace. BUT it will free up her pension massively as she’s not having to constantly fork out for emergency repairs and heat which is going straight out the window.

it’s not always about freeing up capital.

Its for people who live in a much more expensive house than other houses that would meet their needs in areas they would like to live. In my village there are large 'luxury' houses costing £500k+ and small basic houses and apartments costing £150k. Downsizing is viable here and I know several people who've done it.

Downsizing can also be to have smaller bills. My house costs too much to heat and the property tax is too much. I very much want to downsize for those reasons as it won’t give me actual hard cash.

My parents arent downsizing for the reason they don't want to move area and the costs of moving. Despite the fact they have a large 4 bed detached. They have repurposed some rooms and other rooms just locked up. Tbh the holding onto these large properties is not helping all the families that can't find properties in these good areas near great schools. There are around 150 4 and 5 properties in their road and I would say 50 percent of them are owned by empty nesters and the prices have around 15 X since my parents moved in.

And this is very much the nub of it. When a home has got to the point that it's no longer an investment and is costing money, choices have to be made. It is one of the reasons why I am reluctant to move to a house, because if nothing else the council tax will rocket, as will the cost of heating, and to some extent maintenance.

Even with service charges, it's easy to see why people move to a purpose-built flat within a development, where all matters to do with maintaining the building are handled for them.

My heart bleeds for those people unable to downsize because it might "only" release £100k or £200k in cash. Read the room.

OP my understanding of downsizing is that it frees up a bit of money as a bonus. It’s not meant to be what you depend on to live.

I agree with the OP. There isn't a lot of savings to be had by 'downsizing' around here, and a helluva lot of work to actually do so and pay money to the government (stamp duty) just for the privilege of doing so.

The people I know downsizing are selling homes for £1.5 m and moving into places for around £450/500k so releasing £1m to live on, in reality by the time they have sold and paid for everything an possibly sold for under what they thoughts they'd get - they'll still have £700/800k which at 5% will get them £35k her year in interest minus any tax due

DH and I downsized after DCs left home. Moved from £550k big 4 bed house (south coast) to small 3 bed bungalow close by for £320. It needed a refurb which cost around £70k. For us, downsizing meant getting rid of the mortgage completely (we had £40k left on it), lower bills, less cleaning and maintenance and actually a nicer road to live on but we were very lucky to find the bungalow. We gave the DCs some cash, bought a new car and put the rest into a couple of different savings pots.

If you move somewhere smaller, possibly with the option of a downstairs bedroom/bathroom, it may save money in the longer term on stair lofts, etc. Also the property may be as neat as a new pin, have lower maintenance costs and lower utility/community charge bills. £3k pa over thirty years works out to £90k.

You have to change areas to make the most money. I live where I do because of schools but now that my kids have all left, I can live in an area where school performance doesn’t matter.

My neighbour downsized but stayed in the area because she needed to fund some private health treatment.

I downsized slightly differently. I was living in a rented five bed house. Oil fired heating I couldn't afford to run, rooms I never went in (kids had grown up and left home), huge garden I couldn't keep on top of. I stayed because the rent was cheap. Then my mum died and I inherited enough to buy somewhere. I could have afforded to buy my huge house (it was a wreck, single glazing, doors hanging off, dodgy electrics) from my landlord, but instead I bought a tiny two bedroomed cottage just down the road from my original house. I've got a garden I can maintain, a house I can clean in an afternoon, and it's got electric heating I can afford to run.

So it's not always about releasing equity, sometimes it's about convenience. There was no need for me to have a five bedroomed house on my own, and that house has been sold, done up and now bought by people who can make proper use of it.

I think it only works if, for example, you live in a house worth 1-2mln and selling it to move into a 500k flat. Otherwise, it doesn't add up.

Most people would be better off staying put and redesigning where they live so they can live downstairs and make a small flat out of their upper floor to rent out on a weekly basis especially if they are near a city or in a touristy area

Friend did this after her divorce. She also rented out her driveway for car parking.

What are these 50k costs of which you speak? 150k is a lot of money to most people.

It works for some and not for others. A good case is those waiting for their pensions to kick in. 100,000K is enough to retire early get by for a few years e.g £2000 a month for four years approx. Then for most, work pension and lump sims kick in as well as state pension.
For me, having some healthy and active years in retirement is very important so I will likely downsize and use the cash to live for few years.
I have seen too many people taken unwell before or close to retirement.

I was thinking that...£50K costs when moving is beyond excessive.