Downsizing my home...any thoughts?

Like a lot of people who first purchased a home 30 or so years ago with subsequent upward moves I now find myself sitting on a valuable property with little or no mortgage. The nest is almost empty and both myself and my wife are rattling around an empty house that still needs cleaning, heating, general maintenance etc. I find the empty rooms are now a haven for the build up of junk and other miscellaneous items. We have travelled widely in the past number of years, liked lots of places, even loved lots of places but still haven't found anywhere abroad that I might buy a home in. The problem is that we like where we are living, we like our house and our comforts. We are not big drinkers nor socialisers but spend our money on holidays. Question. Has anyone downsized to release equity in their property and if so what did they do with the money? New homes abroad, helped the children out financially, moved to the country? whatever?

Hi Odea

The big problem with downsizing is the stamp duty and other transactions costs. If your home is worth €1m and you downsize to a home worth €500k, you will get €500k before costs. Stamp duty on purchase will be €40k. You will pay at least €10k to the auctioneer to sell you own home. The legal costs should be around €2k and when you add in movers and decoration, you won't have much left out of €100k. That still leaves you with €400k which is not too bad.

But if you trade down from around €700k to €500k, you will only have €100k cash left over.

Your home is exempt from CGT, so any increase in value is tax-free. If you invest the money released, any gains will be subject to income tax or CGT.

So unless you need the money, you should not downsize.

Brendan

there seems to be a softening in the market for houses in 750-950 range
to expensive for investors\young families and not big enough for wealth families.

but the houses below that figure are still rising rapidly so it is not that good a decision to downsize.

living in a detached house is a lot different from living in a semi or appartment, if you do decide to downsize try renting for a short period to see if you like the lifestyle area.

as brendan said you don't make huge money downsizing, but you will make money and save on running costs.

if you see your house as a base camp to come back to between holidays then downsize and use the money to travel.

but don't think you can live in the same area with the same comfort and make a good profit on downsizing

Lucky you.........

It all depends on whether you find the house too big for you or not..............would prob be a good idea to go and view houses in area that you think you might be interested in & see if you think you would be happy in them
My parents' in law downsized to a 2 bedroom apartment because full house & garden were getting too much for them to maintain. They were left with money over & gave some to kids (I don't agree with this becuase they are all in good jobs and can look after themselves - why not spend on yourself, you have been working hard long enough!) and on various other things.

Odea - is there any chance that the (now seemingly common) option of building a (possibly smaller) new house on the site of your existing one, selling the old one with no CGT and moving into the new one would apply in your case (not sure what the SD issues are in this case)? Not saying that this is simple or necessarily the best option (there are lots of issues to consider) but maybe it is AN option?

hhhhhhhhhh said:

there seems to be a softening in the market for houses in 750-950 range
to expensive for investors\young families and not big enough for wealth families.

Click to expand...

hhhhhhhhhh, what makes you say that ?

The reason I ask is that I've noticed myself that some semis in D6 seem to be staying on the market longer than one might expect and I've noticed a sizable price cut in one in particular.

Odea:

Here are the positives:
- tax free gain to use as you wish;
- you are in the top side of the market;
- if you dont do it, when you are gone the family does it for you.

Downside:
- many feel that they would have to move from their friends and family where they have lived for years;
- many parents feel that they will be leaving their children an inheritance and perversely feel good about this to the extent that they will deny themselves any comfort;
- you may get a 'guilt' complex by utilising the potential inheritance for your own use. Overcome that and away you go;
- can affect non-comtributory pensions so be careful here;

In my own view be clear what you are going to do and then do it.

Good ideas from everyone. Cost/side garden/running costs on smaller house etc. Dr.Wizard is correct, I think it is more the emotional decision that has to be overcome. Then again a lump sum for each of the young adult children. Possibility of an overseas home for everyone to enjoy/winters away. Money in the pocket.