Every year, thousands of retired homeowners downsize to a smaller property to fund their retirement. This is a life-changing move that while perfect for some people, isn’t the best option for everyone.

Retirement should be a ‘golden age’ where you benefit from years of hard work, but the reality for many people is that it brings financial uncertainty and worry. Many people find that their pension does not pay enough for them to have the quality of life they want, and with life expectancy growing, they need to find a way to supplement their income.

The pros and cons of downsizing

As you get older and your children have flown the nest, your home can seem too big and empty. Selling up and buying a smaller property could mean that you no longer need a mortgage or have smaller repayments. A smaller house can be less expensive to heat and easier to manage. For many years, this was a practical solution for many people.

But there are drawbacks to downsizing. Moving out of your home, where you may have a lifetime of happy memories can be very emotional. Particularly if you have worked hard all your life to make your house a home that you love. Downsizing can mean fewer bedrooms for grandchildren to sleep in and a smaller kitchen to entertain your family. It all depends on your own, personal situation.

Downsizing might not be enough to fund your retirement completely. Fees for estate agents, solicitors, and stamp duty along with replacing furniture and decorating can be expensive and quickly eat into any savings that were gained.

Some alternatives

Depending on your circumstances, you might not need to downsize your home. Some of the things that people do to boost their retirement income are:

  • Get a part-time job
  • Make sure that you’re claiming any means-tested benefits that you’re entitled to
  • Find Local Authority grants for home improvements
  • Let out a room
  • Get financial support from a relative or friend
  • Borrow money and make regular payments

Most of these options will only give your income a small boost, which may be all that you need. Some of them, such as letting out a room or getting a part-time job, involve a significant change to your lifestyle and might not be sustainable in the long term.

Equity release as an alternative to downsizing

There are two types of equity release, Home Reversion and Lifetime Mortgage. A Home Reversion Mortgage means that you will sell part or all of your home to a lender, but continue to live in your home, rent-free, for a long as you would like to.

Lifetime Mortgages are the most popular form of equity release, and every year thousands of people use them to release money from their homes.

If eligible, you could unlock all the money you need in a way that is suited to your individual circumstances. There are five different lifetime mortgage plans, each one is designed to suit the needs of modern life for homeowners over the age of 55.

With a lifetime mortgage:

  • You receive a large payment of tax-free cash that you can spend as you wish.
  • There are no monthly payments to worry about.
  • If the value of your home increases, you may be able to release more equity
  • You always retain 100% ownership of your home.

Some people worry that there is a hidden ‘catch’ with equity release and it is important that you speak to a qualified advisor, in fact, it is a regulatory requirement that you do. The ‘negative equity guarantee’ means that even if the value of your property decreases, you will never owe more than you borrowed or pass debt on to your family.

A lifetime mortgage could give you access to enough money to allow you to fully enjoy your retirement and live the rest of your life free from financial uncertainty. People use this option to fund adventures, take their dream holiday, make much-needed improvements to their home, or to help their loved ones with big life events.

What do you think?

Downsizing is a popular way to help manage finances in later life, but it’s not the only option. As life expectancy increases and the cost of living continues to get more expensive, the popularity of equity release has also risen.

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We understand that the options can feel overwhelming, and we will always give you honest, friendly advice if you contact us.

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Our honest and dedicated advisors want to help you to fully understand how equity release works. Please read the below, and contact us to find out more.

Equity release may involve a Home Reversion plan or a Lifetime Mortgage which is secured against your property. Equity Release requires paying off any existing mortgage or secured loan. Any money released, plus any accrued interest is repayable upon death, or moving into long-term care. Please be aware that equity release will affect the inheritance you leave and may have an impact on your entitlement to means-tested benefits both now and in the future. To understand the features and risks ask for a personalised illustration. Only if you choose to proceed and our case completes would a typical fee of 1.5% of the initial amount released be payable.

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