Downsizing is a debt free way of getting your hands on your hard earned cash but it does mean moving away from what is possibly the family home. Equity release on the other hand means you can stay where you are but it will impact any inheritance you plan to leave to family.
Done right, downsizing can still be a good idea. You might not just walk away with more money but also simplify your life and reduce your home-maintenance and utility costs for years to come. To reach that happy outcome, you need to steer around the unexpected pitfalls that make downsizing so dicey.
Downsizing for retirement is a great way to save money on mortgage payments, property taxes, insurance, utility costs, and more. You'll also be able to cut back on maintenance and upkeep services like lawn care and snow removal when you downsize from a large home to a smaller home.
Equity release can be a good idea for older people who would like to gain some extra cash in retirement. Equity release can help you make home improvements, pay for the costs of care, help a loved one who is struggling financially, or pay off other debt. However, the release of equity is not suitable for everyone.
The most obvious alternative to equity release is to downsize – i.e. sell your current home and move into a smaller property (or at least one that is less expensive).
The main disadvantage of equity release is that it does not pay you the full market value for your home. You will receive far less money than you would from selling the property on the open market – although of course in that situation you would still have to find somewhere else to live.
Key Takeaways. Downsizing can increase your cash flow, lower your utility bills, and reduce the time you spend on maintenance and upkeep. The downsides to downsizing include having less room for guests and having to get rid of belongings to fit into a smaller space.
Smaller homes are often more energy efficient because they have less space to heat and cool, which means they have a lower ecological footprint. Less Cleaning and Maintenance Required. Fewer rooms means less time spent on cleaning and home maintenance.
For most people downsizing from a larger, more expensive property to a smaller, less expensive one is exempt from Capital Gains Tax if it is your main residence. That means all the equity that is released by downsizing your home is tax-free and can be used to do what you want with.
“But if you can put it into super and then move it across to a pension, then you're going to be in a totally tax-free environment.” But while this will increase the amount of income you can draw down from super, it may decrease or even remove your eligibility for the Age Pension.
"The council can only advise tenants on the benefits of downsizing. We cannot, and would not, force a tenant who is under-occupying a property to move to a smaller one."
Anxiety. Downsizing and moving is often accompanied by the anxiety of the unknown. Anxiety when downsizing often comes from the prospect of discarding possessions and deciding which possessions to take with you. When you've spent a great deal of time in one home, a lot of stuff accumulates.
You're Struggling Financially
You should consider downsizing. A good rule of thumb is to spend no more than 30% on housing a month. If you're suddenly dipping into your savings to get by, or having to get a part-time job to afford your mortgage, a smaller home might be your best option.
What are the disadvantages of downsizing? While downsizing can increase profitability and productivity, it doesn't always yield the expected benefits. Quite the opposite. It causes companies to lose skilled workers, decrease customer service, and lose morale.
Tiny homes have become undeniably popular during the coronavirus pandemic, and with this sudden surge comes new tiny home trends. According to a survey by Fidelity National Financial subsidiary IPX1031, 56% of the 2,006 American respondents reported they would consider living in a tiny home.
As with many products, equity release has its drawbacks. For instance, it is a loan secured against the value of your property, which means it will need to be paid back when you die or go into permanent care. And the amount of the inheritance you can leave behind will be reduced.
Yes, you can sell your house if you have equity release. An equity release product, such as a lifetime mortgage, can be repaid at any point and by any means.
A question our equity release advisers often hear is "Can I lose my house with equity release?" and the short answer is no, you can't lose your house with an equity release plan providing you abide by the terms of the contract.