Downsizing at sixty
The house is the biggest asset most people have and the hardest one to spend. On what downsizing actually releases...
The arithmetic of downsizing is simple and the decision is not, because a house is where people live. This post does the arithmetic and leaves the decision alone.
What it releases
The difference between the sale price and the purchase price, minus the costs of moving. Those costs are the same ones from the rent-or-buy post, and they are not small: on a move from a 500,000 house to a 350,000 one, about 30,000 goes on stamp duty, agents, legal fees and the removal. The 150,000 on paper is about 120,000 in the bank.
What it saves
Smaller houses cost less to heat, insure, maintain and tax. For a couple moving from four bedrooms to two, the running-cost saving is typically a few thousand a year, which is worth counting alongside the capital.
What it costs
- A garden, a spare room, and the house the children grew up in.
- Distance from a doctor, a bus and the people you know, if the smaller house is also somewhere else.
- The move itself, which is harder at sixty than at forty and harder again at seventy. Which is the argument for doing it at sixty.
The alternative
Staying, and releasing capital by borrowing against the house. Cheaper than moving in the short term and far more expensive in the long term. It has its place, and that place is usually later.
Anita Desai
Twelve years in pensions administration, now writing Atlas full time. Believes every money question has a worked example, and that most advice skips it.
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