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Six handy tips to take on board should you be thinking about downsizing, by Ross Clark:

1. Don’t over-estimate the amount of capital you can release by downsizing. If you sell a four bedroom detached house you are unlikely to be able to buy a two bedroom detached cottage in the same area for half the price. Moving costs will eat into your profits further.

2. Don’t leave it too late. It is easier to adjust to new surroundings – and to manage the move – while you are younger.

3. Be aware that a smaller home is likely to be subject to more noise from neighbouring properties than a large one.

4. Choose a property in a location where it is safe to ‘lock up and leave’, so it is easier to spend time visiting or travelling.

5. If you have a large garden, consider whether it might be possible to build a small property in the grounds: almost certainly the cheapest way of downsizing.

6. Bear in mind that tax changes could affect your decision. Though it is not (yet) Conservative party policy, the tax commission set up by Tory leader David Cameron has recommended abolishing inheritance tax and replacing it with a new capital gains tax, but which would not be levied on family homes. If ever introduced, the policy would give homeowners a strong incentive not to downsize.

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This article was created: 21 November 2006.
This article was last edited: 21 November 2006.

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