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 have retired friends in their 60s who moved closer and downsized to live nearer elderly parents when the friends were in their 50s. They're now semi-retired and have upsized, because they've found that now they're home together 24/7 they need more separate space. He snores really badly and she is perpetually overheating in bed with him, so they need separate bedrooms, plus a decent en-suite guest room for friends/ family who come to stay more often now they're retired. Both have signed up for MAs and need separate studies. One of them has also developed a condition that may, in the future, compromise mobility, so they've found somewhere with the possibility of creating a downstairs bedroom and bathroom in the future it it's needed. It was only 10% more expensive than their smaller house.

For many people that £100k is very necessary!

We have lots of downsizers moving in around here but they are from London so they have also moved to the sw, my friends released 60% of their equity (and still live in a 4 bed, larger than their old London home, so downsizing in cost rather than square footage!)

Stamp duty, estate agents fees removal fees, solicitors fees probably £25,000-£30,000 not £50,000 for an average £500,000 house moving to a £300,000 house

But if you had a £1 million house then the estate agents fees alone would be £24,000 (2% estate agent fees near me)

.........and don't forget the fees for the conveyancing solicitor, surveyor, estate agent, removal company........🤷🏻‍♀️.

To start with, £100,000 to £130,000 is hardly small change to most people
You presumably also have pension, and presumably will be paying lower bills in a smaller property (utilities, water rates, Council Tax), and quite likely removing the need for help with gardening etc as you get older.

The idea is that once you are retired, you don't need to live near your job (usually a city) and can go out to a cheaper area for a smaller property.

By "go out to a cheaper area" are you suggesting moving out of the town or City? As, one of the essential criteria for our next home when we downsize, is that it is the very opposite of rural or remote.

Currently, we can both drive, but the older we get, the higher the likelihood is that one or both of us won't be able to. One non-negotiable is that is is near shops, hospitals, and building such as Churches where Community events happen, as well as public transport and plentiful taxis.

I know how you feel, by the time all the costs are added up and to move to a less likable area there seems no point.

I redecorated for the future, walk in shower, easy cleaning floor and double glazing etc for confort. I also cleared out everything I didn’t need. I asked AC to do the same for their rooms, otherwise everything out of the house.
This also prepares for the future incase I have to sell, all the hard work has been done. … Don’t forget the loft, garage and shed.

I think this sums up a lot of the problem. It's the type of housing stock.

There aren't a huge number of new build terraces (or not where my family would want to downside). Plus they love their garden. It's not massive, just an ordinary garden for a 1930s semi.

But the terraces are Victorian, have steep stairs and just a yard.

They really wouldn't be suitable for getting older.

House is worth about 350k. Standard two big bedrooms and a box room. But it has a separate dining room downstairs.

If they have mobility issues it could become a bedroom and they have a downstairs loo.

They don't necessarily need a bungalow but would need something with a toilet downstairs and space for a bed.

All the new build two beds (about 280k so not much left after fees) can't offer that. They have no hallways and are open plan to maximise space as aimed at young professionals.

Cost us under £20k to move.
Came out with £100k on balance. Going to be used for fun!

Thing is a lot of people when downsizing are also planning to make changes in their lives, perhaps because their lives once they’ve retired as not as full as yours will be.

Some may downsize to a flat near their current home, rather than a house, but many move away because, well, most of their friends have already moved away. We have friends whose parents were older and retired at 60 and moved to be near them (only children). Our own ILs are like you - have very active lives in their home town - orchestras, golf club/mates, model railway club (!!), rotary, a garden that FiL has tended and grown veg in for nearly 5 decades, Rambling Club and life-long friends of over 50 years. So moving from the Midlands to be near us in the South never made any sense, not least as they’d have struggled to turn the money from their home into more than a [nice] flat down here. They’ll happily stay in their home until they die.

On our part, though, we’re in the bracket of owning large property mortgage free now that we can choose to downsize from in due course. Because we’re in the south our property is worth a fortune and, thanks to Labour’s IHT changes, it makes no sense to hold on to the value in the property when doing so will deny our kids a large part of it when we die. Our friendships and social lives/hobbies revolve around accessibility to London and the SE, so we’ll opt for a 2 bed flat somewhere close to London and wherever our children settle, passing on money early.

All depends on the ‘life’ you live and want when you retire, and the underlying asset value of your house.

Except all the hospitals and bus services are in the city. And all the fun stuff.

Why would l want to leave a city because I’ve retired?

It's not just about releasing a lump sum but also about reducing your ongoing monthly expenditure - lower council tax, gas, electricity & water can be several hundred a month saved.
Add to that lower maintenance costs on a smaller property & a smaller garden to look after.

I'm inclined to think the biggest block is around large three bed semis. The kind built between the 30s and 70s when room sizes were more generous.

Once you get to four plus bedrooms and detached the difference is probably enough to be worth it.

But do you give up say your garage, garden, opportunity to use a downstairs room as a bedroom when you get older for a new two bed which means you have to be able to get upstairs. Or do you say for future proofing I'll stay put and basically live downstairs if it comes to it because that's worth more to me than 50k?

Obviously it depends on your specific house and your area. Outrageously, you are still expected to pay stamp duty on your new purchase even if you are spending much less than you are selling for a buying a smaller house, so there's that to consider. What's the point of making a relatively minor adjustment in size and price if it's going to cost you a massive chunk in stamp duty?

This only really works if you are doing a big financial downsize, so selling a 1m+ house in London and buying a 400k one in Northumberland or something.

Someone I know downsized recently. Needed to save money each month on heating and council tax and were worried about managing ongoing maintenance bills on a big house on their modest pension.

Sold their large-ish detached four bed house for 440k when it was valued at 500-550k by several agents but they really wanted to move quickly and just kept dropping the price until it went (the market was very slow last year as we all know.) They bought a small 3 bed house that was literally half the size, in a cheaper county but the house was very well located within that town, so it was £325k and my friend offered asking price for it, despite the market being slow.

It needed far more work than the house they'd left which was in great condition. So by the time they'd paid stamp duty and legal fees, put in a new kitchen, upgraded the electrics, changed the gas fire and the garage door, changed the bath to a walk in shower (mobility issues) bought new furniture because some of the old stuff was too big for the new house, they really can't have much money left and they are in a house that's worth much less than the one they sold. Their monthly bills will be less but it hasn't turned out to provide them with the big cash nest egg they were hoping for.

Yes our “downsizing” plan is to move in to a city.

smaller property, may not cost us much less but we will have the advantage of not having to run two, or even one car. Public transport, we’ll look at good train links to an airport. If we’re retired more free time so more to do in a city.

small things like walking to the gym or pool, shops etc rather than having to get in the car. Healthier, too.

We've got a way to go before we downsize, but unless things change, we'll have the same issue.
4 bed house (ours), massive garden:240
2 bed bungalow in same area:230.

I don't get why bungalows are so expensive
Maybe we'll just have to build one in our garden.

Doesn't have to be the same place.
Doesn't have to be a bungalow.
What's wrong with a flat?

We plan to downsize in 2-3 years. DDs will have left uni a year or 2 before, we will have retired and we're looking forward to moving to a cheaper more interesting area. Well be moving from coastal Suffolk to the north east probably. Downsizing in Suffolk would release some equity but not a huge amount.

I retired, sold my one-bedroomed flat in London and moved to a cheaper area. I bought a tiny two-bedroomed house here for less than the equity on my London flat. I could have bought a bigger house but I wanted somewhere I could afford to renovate and heat. I think possibly your problem is you don't want to move far? I'm a couple of hundred miles away from London now.

We have downsized by moving to the Midlands from the South East, it released a lot of money. We didn't have family in the south east. It's allowed us to retire. Our current house is technically smaller but we use more of the rooms so it seems bigger, which is important when you are at home a lot more, and has a decent garden which is very important for hobbies and health. We wouldn't have moved to a bad area, or a much smaller house, you need more room than you think when early retired and still active.

That's an issues with the choices your friends made though, not the concept of downsizing.
My mother sold a 300k house and bought a 120k 2 bed near to me. Spent 50k on moving /renovating the new property (the old one needed quite a bit doing by the time she left too so it was either spend the money there or where she is now). So she has a smaller house done up to her specification w lower bills in an area she likes and 130k added to her savings.

The couple we bought our house from were downsizing ahead of retirement. Our house cost £800k (they paid like £150k in 1980, I’m sure it was paid off). The bought a (still 4 bed) new build in town 10 minutes away for £400k.

So at the outset, they have £400k cash in the bank, but lower energy and maintenance costs. They no longer need to pay to get the hedges cut or the drive re-surfaced. The roof needs re-doing soon and they’ve dodged that one. Same with the boiler and the double glazing. Their property is very low maintenance, less money spent but also less time on gardening, cleaning a big house, fixing breaking shit. They did very well on their small little mortgage back in the day. I doubt Dh and I will see returns like that.

Maybe the difference is all these people are saying "we". It's a bit different moving away from all your friends/clubs etc if you're taking a partner with you to if you're doing it on your own.

My plan although not for at least 10 years) is downsize from a 3 bed to a 2 bed to release money. Would want to stay in the same area; I have been looking and after costs it would be around 100k, not sure we will as we have 3DC and I'm very fond of our home.

Don't do it then.

Not that dissimilar in NE in parts. Parents would have to fork out more money to get a 2 bed bungalow complained to their very large 3 bed terrace