Downsizing your house: the pros and cons
Downsizing to a smaller house may become appealing as you get older. It can free up cash, save you money on your bills and mean you live in a property better suited to your needs. But it’s vital to consider the pros and cons of downsizing your house first.
What are the benefits of downsizing your home?
From downsizing your house to save money to having a more manageable property to look after, there are a range of benefits of downsizing your home including:
Releasing equity: One of the main advantages of downsizing your house is that by selling your current home and buying a smaller, less expensive property you can free up equity locked in your property. You can use the proceeds to pay off your mortgage if you still have one, fund retirement or help children or grandchildren to buy their own home.
- For example, if you sell your home for £500,000 and buy a bungalow for £300,000 this frees up £200,000, assuming you’ve paid off your mortgage.
- While if you still an outstanding mortgage balance of £70,000 you can use the proceeds of the sale to pay it off. Although there will be moving costs to factor in such as stamp duty (read on for more on this).
Cheaper bills: Downsizing your house can reduce the cost of bills. According to Ofgem data analysed by Uswitch in January 2024, the estimated average monthly dual fuel bill for a 1-2 bedroom house is £115.14 compared to £228.74 for a house with 5 bedrooms or more. This saving amounts to more than £100 a month.
Less maintenance: Smaller homes require less general maintenance. So while you might be fine with the current level of cleaning and maintenance, it’s wise to look to the future and consider how you would cope in future years.
Move to a better served location: If you live in a rural area and depend heavily on driving to get to local amenities, you might want to consider downsizing your house and moving somewhere with good transport links and a vibrant high street in close proximity with local arts, leisure facilities and doctors surgery.
Closer to family: Downsizing your house may mean you can move closer to children or other family members.
Reasons not to downsize
When weighing up the pros and cons of downsizing your home you’ll also need to think about the reasons not to downsize. These may include:
- Less space: By downsizing your house and moving to a smaller property you’ll have less space for your belongings. So you may need to put items into storage or get rid of them. You may also have less space for family and friends visiting to stay over.
- Emotional ties: Downsizing your house and leaving a home you’ve lived in for many years can be difficult emotionally.
- Moving costs: There are a number of moving costs of downsizing your house to consider. Read on for more.
Should I downsize my house and pay off my mortgage?
Whether or not you should downsize your home and pay off your mortgage will depend on your circumstances such as can you afford to buy a property that will suit you long term if you downsize your house now? Will you have any fees to pay if you pay off your mortgage, such as an early repayment charge?
What are the costs of downsizing your house?
You’ll need to factor in the costs of downsizing your house because the cost of moving house can be considerable. In fact a study by wealth manager Hargreaves Lansdown in November 2023 found more than a quarter of homeowners in the UK now want to downsize in retirement but 22% say they haven’t been able to do so because it is too expensive. And a further 13% blamed the cost of stamp duty in particular.
- Stamp duty: If you’re buying a property costing over £250,000 in England or Northern Ireland you’ll need to pay stamp duty. (Different rules apply if the purchase will result in you owning two or more properties). So if you’re downsizing your house to a property that costs £200,000 you will have no stamp duty to pay. But if you’re downsizing your house to a property costing £400,000, your stamp duty bill would be £7,500. Use our stamp duty calculator to find out how much you will pay.
- Estate agent fees: Average estate agent fees in 2024 in the UK are typically 1.42% including VAT. So on a £275,000 house this would mean estate agent fees of around £3,900. Read more in our guide on Estate agent fees and how you can save.
- Conveyancing fees: Downsizing your house will also incur conveyancing fees. Average conveyancing fees when buying a house range from around £500-£1150 plus disbursements, according to Reallymoving. These disbursements could add on up to £700 or even more. While average conveyancing fees when selling a house are around £610-£950. You’ll pay more if it’s a leasehold property. Read more in our guide How much do conveyancing fees cost?
- House survey: This cost can vary hugely, from a few hundred pounds to over £1,000 depending on factors including the type of survey and the value of the property. Find out more in our guide How much does a house survey cost?
- Clearance: When you’re downsizing your house, once you’ve got rid of what you can, your council may be able to collect items for free. Alternatively, our household rubbish removal partners at LoveJunk can assist.
- Removals costs: These will obviously fluctuate according to how much is being moved and whether at this stage in life you invest in someone to pack for you. A safe estimate would probably be around £1,000. Find and compare instant quotes from local quality assured removal firms with our find a removal service
Compare home removal quotes today with our removal costs calculator.
Downsizing property types
If you’re downsizing your house and buying a new home outright, these are some of the main property types you may choose:
- Buying a smaller house
- Downsizing from a house to an apartment
- Moving into a bungalow – this may be easier to manage in the long term compared to a house.
- Buying a retirement property – There can be lots of costs associated with these properties, find out more in our guide Hidden costs of retirement properties and see our comparison of retirement properties to see examples of the issues to be aware of.
Other downsizing options
Many downsizers will sell their current property and buy their new property in the traditional way. But there are other options when downsizing your house in the UK including:
Shared ownership: If you can’t afford a property or want to put your equity elsewhere, then you could consider shared ownership. This allows you to buy a share of a property from a housing association, retirement village or private developer (typically from 25% to 75%) and pay rent on the remaining share. Larger shares can be bought over time.
Although a key difference with Older Person Shared Ownership, is that the maximum share that you can buy is normally 75%, rather than the usual 100%. There’s a lot to consider before opting for shared ownership – read our guide What is Shared ownership? Is it worth it? Also, if you’re considering a retirement village, also read our guide Hidden costs of retirement properties.
Developers’ downsizing schemes: Some developers have ‘downsize schemes’ where they will help you find a buyer for your current property so that you can buy a new build property from them. This may make the process of downsizing your house easier but there are downsides to consider such as having less choice or properties. Also, you may be able to get more for your property if you sold on the market. Using any scheme from a developer can also make it harder to negotiate a better price on the property you are buying too.
Part exchange: Some developers offer part exchange schemes that offer downsizers the opportunity to trade in their house against the value of a new build property bought from a developer or builder. However, as well as issues such as property valuation offers often equating to a lower than achievable market price, most homebuilders will only consider homes worth up to a certain amount of the new build value (usually around 70-75%), so downsizers will have to take on a more expensive property.
Renting: You could decide to invest the equity from your home and use the income to cover the cost of renting a property. But there are other considerations to take into account with renting as you may not have the guarantee of a long term lease and there could be the possibility of rent rises over time.
Get instant quotes from regulated and reviewed conveyancing solicitors that cover your area.
How to downsize checklist
- Consider location carefully – will it suit your needs in the future, such as having good public transport or amenities within walking distance?
- Property type – what sort of property will you want to live in?
- Do you want to pay off your mortgage before selling the property?
- Start decluttering sooner rather than later – it may take a lot longer than you thing,
- Prepare your home for sale – read our guide 12 tips for selling your home.
- Start viewing properties. For tips on what to watch out for, read What to look for when viewing a house
Are smaller houses less expensive?
Smaller houses are not necessarily less expensive. If you want to move to be closer to family, you may be restricted in where you can move to and may end up competing with first time buyers, landlords and new families who are also looking for smaller properties with gardens, amenities within walking distance and good transport links.
With low stocks of suitable housing helping to push property values upwards, it may be difficult when you are downsizing your home for retirement to find a suitable home at a price which will make moving worthwhile.
Decluttering tips to downsize your home
Decluttering to downsize can be very time consuming. Here’s how to get started:
- Sort one room at a time: Start with the largest room and work your way through your home.
- Measure your new home: You’ll need to be sure your furniture will fit before taking it.
- If you have children, ask them to sort through their belongings themselves.
- Donate items: Pass on any unwanted items to friends, family or charity shops.
Can a bridging loan help you downsize?
Some people are put off downsizing because they don’t want the stress of buying and selling a house at the same time. One way to avoid this is to take out a bridging loan so that you can buy your new property before selling your current one.
By doing this, you’ll be a chain-free buyer which will make you more appealing to many sellers. Also, you can take your time selling your property if you want to, so you may be able to hold out and sell it for a higher amount. Find out more in our guide Bridging loans explained.
When is the best age to downsize?
There is no set right time when it comes to downsizing your house to a smaller home, but there may be another life event that triggers you thinking about downsizing your house, such as retirement, the final payment on your mortgage or moving nearer to grown children and grandchildren.
It makes sense to consider downsizing your house before you get too old, as the accumulated stress, hassle and sheer timescale of negotiating and completing a house move should be easier to deal with at this stage, when you are still relatively fit and healthy, as opposed to later in life when illness or mobility issues potentially start to take their toll. For some, downsizing at 55 is a good time of life, but others will be older or younger.
The psychological or emotional upheaval of moving from a family home, full of poignant memories, or of saying goodbye to friends and family is another significant obstacle to factor in, but the sooner you move, the sooner you are likely to make new friends and feel settled.
If you are considering selling, see our step-by-step guide to selling to get you started
Alternatives to downsizing your house
You may decide that moving and downsizing your house to release equity isn’t for you, so what other options exist? There are a few other options available to you in retirement if you have equity locked in your home.
- Equity release is a way of releasing money from the value of your home without having to move out or pay it back during your lifetime. Our guide explains how equity release works and the difference between a lifetime mortgage and home reversion scheme.
- Retirement interest only mortgages allow you to take out a home loan to release equity. You repay the interest on your loan monthly and don’t have to repay the capital until you die or go into long-term care. Then your home is sold, and the lender is repaid from the proceeds. If you are considering a retirement mortgage, it is a good idea to speak to a mortgage broker as they know which lenders offer these products.
Get fee-free advice on retirement mortgages from our mortgage broker partners at L&C
What is the meaning of downsizing your house?
Downsizing your house usually means moving to a smaller or less valuable property and is most commonly associated with retirees or those whose children have left home.
