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03 Jul 2022

Rightsizing: What to do if a house isn’t your ‘forever home’

Rightsizing: What to do if a house isn’t your ‘forever home’

What happens when your ‘forever home’ doesn’t actually fulfil your long-term needs?

Many over-55s are in this position, according to new research from Paragon Bank (paragonbank.co.uk). Some 30% feel their current home is either too big, too small, or won’t be the right size for them as they age.

Paragon Bank’s new report – the Rightsizing Challenge – found more than one in 10 (11%) over-55s feel their property is too big, and one in 20 (5%) claim their current home is too small.

A further one in seven (14%) say while their property is the right size for them now, they’re still planning to downsize in the future.

While many people would like to move to a home better suited to their future needs, a lack of suitable available properties was found to be a significant barrier – something that is also contributing to rocketing house prices.

Despite a lack of homes to choose from, seven in 10 (71%) of those who feel their home is too big are planning to press ahead and move in the next five years.

Bungalows are the most popular type of property that downsizers expect to move to, followed by detached homes and flats. People aged over 75 are particularly likely to say they plan to downsize to a smaller home.

While around nine in 10 (91%) would-be downsizers say they expect to own their next property outright, a further 4% say they plan to buy with a mortgage and 5% are expecting to rent. And if they did manage to free up some cash by moving home in the next five years, just over half (52%) would keep it as cash.

Some 28% would invest it, and the same proportion would gift cash to family members. Those aged over 75 would be more likely to gift money to family, with 51% saying they would do this.

Just over a quarter (26%) of people would also look to splash out on a “big-ticket item”, such as a holiday or car, while a fifth would look to use the money to upgrade their new home.

Those considering rightsizing to another home will need to weigh up the costs carefully.

Home movers in England and Northern Ireland face potentially paying stamp duty, while those in Wales may pay the Land Transaction Tax (LTT), and in Scotland the Land and Buildings Transaction Tax (LBTT) would apply.

Online calculators may help would-be movers to work out the potential costs. They could also help people decide whether adapting their existing home to make it better fit their changing needs may be more cost-effective than moving.

A stamp duty calculator can be found at tax.service.gov.uk. An LTT calculator can be found at gov.wales and an LBTT calculator is at revenue.scot.

There will also be other moving costs to consider, such as surveyors’ costs, legal fees and furniture removal fees.

Paragon Bank savings director Derek Sprawling says: “Many people in retirement age, or nearing retirement age, feel their home isn’t the right size for them. Whether it’s a family home where the children have left, or a well-loved property that simply isn’t right for their ongoing needs, it’s a dilemma facing many homeowners.

“Moving home is not a simple decision, with many memories and feelings associated with the family home. But it can make sense for a lot of people who either live in a home too big for their needs, or who are asset rich but cash poor.”

He adds: “Many people over the age of 55 who choose to rightsize will end up with a cash windfall. With half of people choosing to keep that finance in a cash savings account, it’s important they find the right account offering the best returns.

“Rightsizers should consider how they intend to use their cash windfall. For example, do they need all of it now or would they be happy to lock some away for a couple of years and retain a smaller amount for everyday living? Consider a portfolio of different savings accounts to ensure you are maximising the returns for your circumstances.”

Some people may want to consider taking independent financial advice when weighing up what to do with a cash windfall.

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