Your current home may well be the place where some of your happiest memories were created. Realistically, however, downsizing may be an excellent way of financing many more. Here is a quick guide to some key questions on the topic.
Why should I downsize my home?
Home may be where the heart is, but property has a financial value. There are various schemes which make it possible to release equity in property while you continue to live in it. These each have their advantages and disadvantages and you would need to do your research thoroughly to decide if one of them was right for you.
Downsizing simply means moving from a more expensive property to a more affordable one. This may be a smaller property and/or one in a different area. This turns home equity into cash, which can be used for other purposes. For example it can be used to help your children get on the property ladder themselves.
The practicalities of downsizing
Downsizing is essentially selling a home and buying another one. This means that you will have to go through the home-selling and home-buying processes again. It also means that you will have to pack up and move your worldly goods.
You will also have to be realistic about whether or not all your current possessions will actually fit into your new home. Instead of feeling sad or stressed about this, it may help to think about it as an opportunity to adjust to your new situation. It may also be appropriate to think about giving inheritances in advance. For example if you have some furniture you love and wanted to pass on, you could pass it on now.
You could look at storage as a temporary option. For example if you’re downsizing to help your children with a deposit, you could store larger items until they have bought their own homes.
You could also find new and possibly better ways of storing and accessing familiar items. Younger people may be able to help with this. For example photo albums can be turned into collections of digital photos. All your precious memories will still be saved – and in a fraction of the space.
You might also like to consider selling some of your excess possessions. This can mean anything from listing them on eBay to selling items through a specialist channel, e.g. an auction. Before disposing of anything for free, you may wish to check to see if it is worth selling. Perhaps some of your memorabilia has historic value, and would be of interest to a local museum.
Downsizing and the family finance
Your main reason for downsizing may be to help your children, but hopefully there will be some money left over for you too. This means that you need to think about how to make best use of it.
Of course, this will depend on your individual situation. For example, you may want to think about how likely it is that you will need to access this money in the near future. If it is important that you can withdraw it quickly, then you will need to keep it somewhere which allows that, such as an instant-access savings account.
If you are confident that you can live without the money for some time, then you have a wider range of options. For example you could put some of it into bonds or invest some of it in stocks and shares. Whatever you do, it should be in line with your plans for retirement and your overall financial goals.