The cost of downsizing

Downsizing is becoming a more appealing option for people who want to free up some cash or simply live in a home that’s lower maintenance. Recent research shows that almost half of pensioners around 5.7 million people, are considering moving to smaller homes and this figure is expected to almost double to 11.1 million by 2036.
But the cost of moving could be more than £25,000, with the long list of expenses including stamp duty, estate agency fees, surveys, legal costs, removal fees and refurbishment costs.

This could substantially eat into the equity released – and for some it may not be worth their while to downsize once these expenses are factored in. Here’s a breakdown of the buying and selling costs that downsizers face:

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Stamp duty

The typical downsizer lives in a four-bedroom house but wants a two-bedroom property.The average four-bedroom home is worth £490,284, according to Zoopla, while the average two-bedroom property will set you back around £292,797.

Stamp duty is one of the biggest barriers to downsizing. This tax is calculated according to the purchase price. You pay nothing below £125,000, 2% on between £125,000 and £250,000 and 5% on the value of the property above £250,000. For an average two-bedroom home, the stamp duty bill would be £4,639.85.

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Estate agency fees

Estate agency fees for selling a property can vary – but substantially eat into profits. According to Which? the average estate agency fees for selling is 1.8%. That means the bill for selling a four-bedroom home could be £8,825, plus VAT, making it £10,590.

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Conveyancing, surveys and mortgage fees

There are lots of smaller costs too, which all add up. Conveyancing fees for both buying and selling will set you back an estimated £2,000. This covers all the legal and administrative work associated with transferring the ownership of buildings – and land. The cost also covers crucial checks made to ensure there are no plans being hatched behind the scenes to build a fast food restaurant next door. There’s also a fee for a homebuyer’s survey carried out on the new property, which costs an average of £600.

There will also be mortgage fees to consider should you still be repaying a home loan. When you move, you will need a new mortgage deal. The average mortgage fee is currently £997 according to Moneyfacts.co.uk.

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Packing up and moving on

Packing and moving the contents of a four-bedroom house is likely to cost a further £1,000. Once you move the costs continue. One expense that many people underestimate is renovations, repairs and redecoration of the new home which could set you back a further few thousand pounds.

On average new homeowners spend around £10,000 doing up their property in the first year.

On average new homeowners spend around £10,000 doing up their property in the first year, according to research by Aviva. And don’t forget the Royal Mail redirection service at £63.99 per person for a year– that’s £127.98 per couple.

Equity release vs downsizing.

The actual cost of downsizing

While downsizing could free up some money, the total bill (using our examples) for making that move would be £29,954.83. So if you’re thinking of downsizing, do your sums and make sure that move pays off for you.

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