There are many reasons why you might want to downsize your home: it might be too big for you now that children have flown the nest; you could release capital to help children get on the property ladder; you are buying a holiday home overseas and want something with lower maintenance in this country, or maybe you need to sell your existing home upon a divorce.
There are a number of issues that can arise when you choose to downsize which will differ depending on your reason for moving. Peter Watkin, Head of Residential Conveyancing at Rundlewalker Solicitors in Exeter explains why it is a good idea to seek expert legal advice from a specialist property lawyer to ensure that the conveyancing process goes smoothly.
If you opt to down-size because your home is too big for you or because you want to move to a part of the country where property is cheaper – for example, to Devon from London or the Home Counties – you have the option of selling your home and renting a property until you find a new home you really want. If you have enough money from your house sale to be a cash buyer, that makes you more attractive to sellers as you will not bring a conveyancing chain with you to the process.
Be warned though: with the current enthusiasm in the local housing market, it may be risky to be out of the market too long in case prices rise out of your reach. It is also worth checking if there are any unusual restrictions particularly if you are looking to buy a property in beautiful Devon. Some properties can have restrictions on the type of occupation allowed and some new developments may restrict buyers to people with a local connection to the area.
If your objective is to release equity from your home to help family members, then you will need to consider implications for capital gains tax and inheritance tax. For example, you may want to gift some of it to close family, which means you could reduce the inheritance tax bill your family has to pay when you pass away. Indeed, if you live for seven years after the gift is given, there will be no inheritance tax to pay on the gift. Gifts given in the three years before your death are taxed at 40%, while gifts given three to seven years before your death are taxed on a sliding scale known as ‘taper relief’; this ranges between 8% and 32%.
However, the devil is in the detail, and you should get expert advice from your accountant on the particular implications for your circumstances.
If you are acting as ‘The bank of Mum and Dad’ you might prefer to loan the money with a written agreement or insist on a prenuptial agreement between your child and their future spouse to try and protect this gift from a future divorce settlement.
If you decide to buy another property on a buy-to-let basis to generate an income, again you need to talk to your accountant as capital gains tax, Stamp Duty Land Tax and income tax liabilities will all need to be considered.
Divorce is always a tragedy but divorcing later in life when children have left home may mean that couples must sell the family home to provide the funds for two households as well as the prospect of obtaining a mortgage which can be more challenging if you are aged over forty.
As we age there is always the possibility that we may struggle to cope with living in our own home. Supported living, care accommodation or retirement complexes are all potential solutions to problems of accommodation in later life and sometimes we simply want to be closer to family or friends.
It may be that you or your spouse are no longer able to cope with living in your own home and one of you needs to move into a care home or retirement home. The remaining spouse may therefore want to move into a smaller property when this happens, to be closer to the care home or nearer to family or friends. Care homes fees and the cost of care, how it is paid for, and who pays for it are all very live issues currently, so before life changing decisions are made it is vital that you get proper advice about your choices.
Whatever your reason for down-sizing, and even if you have not yet found your new home, it is a good plan to speak to your conveyancer at the earliest opportunity.
For more information, call our Residential Conveyancing Team on 01392 209209 or contact us via email at firstname.lastname@example.org.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.