What happens when you reach the top of the property ladder? It may be time to consider taking a step back down again. In this blog, we answer some of the most common questions we are asked about downsizing.
Q. What is downsizing?
A. Downsizing is the act of moving to a smaller home than the occupier currently lives in. It could be the new home has less square footage, fewer bedrooms or a smaller garden. Sometimes downsizing involves swapping a house for an apartment.
Q. Why do people downsize?
A. The term downsizing often goes hand-in-hand with another phrase – ‘empty nester’. This refers to a family home where all the children have moved out – or ‘flown the nest’. When a homeowner has unused bedrooms and too much space, they frequently come to the decision to move to a smaller property.
Downsizing can also liberate people from onerous maintenance, especially if the property has a large garden or is pre-war. Those who want to avoid time- and money-zapping activities, such as mowing expansive lawns or repairing period features, often opt for a smaller new build that needs little or no upkeep.
Another common reason for downsizing is to improve finances. Generally, a smaller property will not only be cheaper to buy but it will be cheaper to run and heat. Of course, this depends on the area where the new home is being bought.
Downsizing can also help homeowners become mortgage free. If there is enough equity in the property being sold and the price of the smaller home being bought is less than the profit, any incumbent mortgage can be settled and the new property bought outright.
Q. Do you have to be an older person to downsize?
A. It’s a common myth that downsizing is the preserve of retirees and older people but anyone can make the decision to move to a smaller home. For those who want to move to a more expensive area, downsizing to smaller, less expensive property may be the only way to get a foot on the ladder in a new neighbourhood.
Q. Is there a special stamp duty rate for downsizers?
A. You may have read about a campaign to abolish or lower stamp duty on onward purchasers made by downsizers but the pressure on the Government didn’t result in any change. At present, those buying a smaller property are bound by the same stamp duty thresholds as other purchasers (except first-time buyers).
Q. What stamp duty will I pay on a smaller property?
A. Stamp duty is calculated on the value of a property and not on its size or location. A downsizer in England will pay zero stamp duty on a property worth £250,000 or less; 5% on the portion from £250,001 to £925,000 and 10% on the portion from £925,001 to £1.5 million.
Scottish downsizers pay Land and Buildings Transaction Tax. This is zero on homes that are £145,000 or less; 2% on the portion from £145,001 to £250,000; 5% on the portion from £250,001 to £325,000; 10% on the portion from £325,001 to £750,000 and 12% on the portion over £750,000.
In Wales, downsizers have to pay Land Transaction Tax. This is zero on homes that are £225,000 or less; 6% on the portion from £225,001 to £400,000; 7.5% on the portion from £400,001 to £750,000; 10% on the portion from £750,001 to £1,500,000 and 12% on anything over £1,500,000.
Q. How will I know if everything will fit in a smaller home?
A. Downsizing will usually involve an evaluation of possessions and this is where floorplans really matter. Movers will need to compare the measurements and dimensions on the floorplan for their current home with that of a new property, working out what might fit.
It’s important to measure the height, depth and width of items such as wardrobes, dining tables, beds, sofas and other large items, such as sideboards. Anything that won’t fit, or isn’t needed, can be sold, donated, recycled or offered to the buyers. Ask us for help with your TA10 Fixtures and Fittings form if you want to sell items as part of a sale.
If you’d like a valuation for your current home and a list of smaller properties for sale, please get in touch.
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