As retirement approaches, many homeowners begin reviewing their financial and lifestyle plans. For some, this includes downsizing to a smaller property. For others, the desire to remain in their family home may lead them to consider alternatives such as later-life mortgages. This guide explores the benefits and challenges of downsizing, the timing of a move, and the options available if selling your home is not the right fit.
The Case for Downsizing
Moving to a smaller home can:
- Reduce ongoing living and maintenance costs.
- Release property equity to fund lifestyle goals.
- Eliminate or reduce mortgage debt.
- Support a more manageable and aspirational retirement.
For instance, 15% of homeowners aged 55+ who released equity in 2024 did so to fund travel. Among those with large family homes, 30% of ’empty nesters’ are now considering downsizing following their children’s departure. However, more than 70% remain reluctant to move, preferring to retain their homes and explore alternative lending options.
Timing: Before or After Retirement?
Buying Before Retirement
Some retirees prefer to secure their retirement property before leaving full-time work. This approach offers:
- Stronger affordability while income is stable, but more competition for lower-priced homes.
- Potential rental income if the property is let out (e.g. Airbnb).
- A smoother emotional transition by easing the move away from the “forever home.”
Buying After Retirement
Delaying until after retirement may offer:
- Greater clarity over location, lifestyle, and health needs.
- Flexibility to match the property to your retirement experience.
- Time to align estate planning with future care and inheritance goals.
Key Considerations When Choosing a Retirement Property
Location and Lifestyle
- Proximity to family, healthcare, and support services.
- Accessibility to shops, leisure, green spaces, and transport.
Property Type
- Demand for bungalows remains high. Though only 2.5 million exist in the UK, over 38% of older adults would prefer a single-storey home.
- 58% cited that layout is important, 48% preferred the maintenance ease, and 41% valued independence.
Room Requirements
Spare rooms remain valuable for:
- Visiting family
- Hobbies and home offices
- Generating income
Among homeowners aged 65+, 87% have at least one spare bedroom. 51% have two or more. Plus, there is further opportunity when renting a room under the scheme, which can generate up to £7,500 per year tax-free.
Financial Structure
- Purchasing outright avoids repayments but reduces liquidity.
- Later-life mortgages can support affordability, especially when avoiding sale proceeds or when deferring income.
- Legal advice is essential when considering inheritance or resale restrictions tied to retirement developments.
Understanding the Risks of Downsizing
Emotional and Lifestyle Impact
- Leaving a home rich with family memories can be difficult.
- Downsizing may mean sacrificing storage, outdoor space, or familiarity with the local community.
Hidden Costs
- Stamp duty, legal fees, agent commissions, and removal costs can significantly reduce net equity gains.
Supply Constraints
- The limited availability of suitable homes may force compromises.
Loss of Flexibility
- Once proceeds from a sale are spent, further lifestyle changes become harder to accommodate.
Impact on Means-Tested Benefits
- Releasing capital through property sales may affect eligibility for care support or pension credits.
Stamp Duty on Second Homes
- Purchasing before the sale of your current home incurs additional stamp duty charges.
Alternatives
Later Life Mortgages
Downsizing is not the only route to accessing property wealth. Lifetime Mortgages and Retirement Interest-Only (RIO) Mortgages can provide tailored borrowing with the ability to stay in your home.
Among homeowners aged 50+, 34% consider downsizing to release capital, but only 6% explore equity release mortgages. Yet of those who proceed, 99% choose a Lifetime Mortgage.
When a Later Life Mortgage May Be More Suitable
For clients who value familiarity, flexibility, or who cannot find a suitable property, later life mortgages offer several advantages.
Downsizing vs Later Life Lending: A Comparison
| Feature |
Downsizing |
Later Life Mortgage |
| Emotional impact |
High (loss of familiar home) |
Low (stay in your home) |
| Upfront costs |
High (stamp duty, moving) |
Low to moderate (arrangement fees) |
| Flexibility |
Limited once proceeds are spent |
Flexible borrowing options |
| Long-term affordability |
Lower outgoings post-move |
Interest may accrue over time |
| Inheritance |
Cash proceeds can support heirs |
Reduces estate unless repaid |
| Control over property |
Requires sale |
Full ownership retained |
Final Thought: Blending Lifestyle and Legacy Planning
Whether downsizing or exploring borrowing options, the right approach to retirement living balances lifestyle goals with financial resilience.
At Henry Dannell, we support homeowners aged 50+ with expert guidance on retirement property planning, equity release, and later life lending. If downsizing feels uncertain or unappealing, we invite you to speak with a specialist adviser to explore your full suite of options.
Please note: To understand the features and risks, always obtain a personalised illustration.
A mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Mortgage deals may not be available, and lending is subject to individual circumstances and status.
