by Mark Johnston
Downsizing Could Boost Retirement Funds!
For many retirees, downsizing is not merely an option in the current climate it is a necessary survival strategy that could stretch savings and prevent a critical money crunch later on.
On average, those looking to downsize hope to buy a home that is 36 per cent, or £57,400 cheaper, based on an average UK home worth around £160,000. This figure is only the average, as 11 per cent of those looking to downsize said they were aiming to buy a house that is at least 50 per cent cheaper. A further 4 per cent plan to sell their home without buying another property.
The research from Castle Trust, a housing investment and shared equity mortgage provider, shows that an estimated 3.25 million households, which equates to 13 per cent of working adults, plan to downsize their home in a bid to fund all or part of their retirement. Homeowners could raise approximately £186 billion towards their retirement by downsizing their homes.
Stephen Lowe, group director of external affairs and customer insight at Just Retirement, said “The traditional view is that downsizing is a way older people can free up some capital and cut their living costs.”
Some experts believe that for home owners who are looking to increase their retirement income, downsizing is one option to investigate.
However according to Just Retirement, increasing numbers of retirees do not want to sell their family home and move to a smaller property.
Andrea Rosario, Director General of the Equity Release Council (ERC) also highlights that downsizing can have an “emotional impact” on all those involved.
While moving to a smaller property may seem a sensible choice on paper, and in fact be the best option for many, for others the idea of leaving the family home, their neighbours and all their memories is an incredible upsetting concept.
A report, The role of housing equity in retirement planning, found that 55 per cent of homeowners had lived in their homes for more than 25 years and a further 24 per cent had bought between 16 and 25 years ago. Therefore what may seem to be an easy financial decision from a practical point of view is often a huge emotional wrench that people seem keen to avoid.
Although it appears that currently retirees are becoming more resistant to downsizing their homes and more open to equity release. According to recent research half said they would rather sell up than use equity release, but only a third of current retirees said they would rather downsize.
Other Reasons retirees did not want to downsize included lower future house price gains from a smaller home and the high costs associated with moving. Others do not want to go through the hassle of home hunting and finding a suitable property.
A spokesperson for the Council of Mortgage Lenders (CML) said: “Older people who are asset rich but cash poor may prefer equity to downsizing, depending on their circumstances and priorities”.
Story link - Downsizing Could Boost Retirement Funds!
Related stories to : Downsizing Could Boost Retirement Funds!