Should I go or should I just stay? The pros and consSelling your home is a difficult decision to make. Sinead Ryan explores the pros and cons of downsizing. Can you make it work? Can it prop up your finances in retirement? Or should you stay and enjoy your home?
The first thought most people have about trading down is that they're most likely leaving a house that's far too big for them. Large family homes are the property type most in demand, so it's a seller's market at the moment. That means you can maximise the price you'll get.
- It's important to get several valuations from local estate agents, check the price similar properties are fetching on the Property Price Register and make sure you're being realistic. Older houses may need renovation or insulation works and this should be factored into the asking price.
- Your property tax bill is much higher than it needs be. If you're on a fixed income, like a pension, it's going to eat up much more of your money; moving to a smaller property will save immediate cash.
- Utility bills tend to be much higher for older, bigger houses than for small, modern ones. Many homes built in the 1970s and 1980s may have a poor Building Energy Rating, with bad insulation and single glazed windows. That increases the price of heating and electricity. You'll save every month by moving somewhere smaller.
- New houses and apartments are built to far higher standards than your home was. You won't believe the quiet and warmth along with the top finish.
- The capital you raise may make two smaller homes affordable. It's quite popular for older people to buy a full duplex, ie, a one-bed flat and the two bedroom over it, and rent one out for a regular income. You get to control who the tenant is and have a nice new property to live in.
- Insurance for big old houses is higher than for smaller, modern units. You'll save on the premium.
- Selling frees up capital. Most older people have their mortgages paid off, so any money realised can be invested to prop up your pension.
- You'll have acquired lots of 'stuff' during your lifetime with plenty of space to store it. Downsizing means you'll have to seriously declutter, but this can be a positive also.
- If you've given your children a good education and they are now independent, you should not feel guilty about not providing an inheritance in the form of a house for them. Your first priority is yourself, and your senior years.
- If you do decide to sell up, be careful of the timing. Selling first frees up the cash, making you more attractive as a buyer. However, you may have to rent while you're finding your dream retirement home. Plan a budget for this, as it's not something you want to rush. If you wait until you find your new home, you might discover your old house takes longer to sell than you thought. A good estate agent will guide you.
- Older people should not be made feel guilty for not 'moving along'. You have worked hard all your life to provide for your lifestyle and are entitled to enjoy it with all your friends and local amenities around you.
- You won't have to 'integrate' into a new area, perhaps one without lots of other older people around. You won't need to find new shops or hobbies or churches, which can be unsettling in later life.
- You could add to your income by renting out one or more of your bedrooms. Revenue allows you to earn up to €14,000 a year tax-free by so doing, as long as the tenant is long term (i.e. not Airbnb, but a student, say).
- You don't need to register with the Residential Tenancies Board or provide a rent book as you are considered a 'licensee' rather than a landlord in the normal sense.
- You can choose whether to provide food/laundry as 'digs'. Before you embark, do lay down ground-rules about common areas, access, noise and rent.
- Your home can be passed along intact after your death to your children, who grew up there. It is vital to make a will so there are no disagreements later on, especially if one child wants to buy the others out.
- You'll always have plenty of room for grandchildren.
The next stage: Property and the Fair Deal Scheme
The issue of selling up in later life often coincides with the need for extra care and support. When it becomes necessary to move to a nursing home setting, many people assume the Fair Deal (or Nursing Home Support Scheme) is a 'no-brainer', but this is not so, and the decision will hinge on the value of your family home.
Under the scheme, two contributions are made towards care costs: 80pc of total income (eg. your pension) plus 7.5pc of all assets every year. Assets include the family home, although this is capped at three years (or 22.5pc) of the total. It also includes savings, shares, business assets and second homes.
Due to an anomaly in the system, if you sell the family home while residing in the nursing home, the contribution cap is lifted - ie, 7.5pc will be taken from the proceeds every year.
Rent it out, and 80pc of the rental income is swiped.
It is for this reason that many people choose to simply board up the house, sadly, as financially it's the best option.