Being mortgage-free is a dream for almost anyone.
Downsizing can help you achieve it sooner rather than later.
Read on for your guide to downsizing to be mortgage-free.
Does downsizing help you be mortgage-free?
Many people nearing retirement age consider downsizing a convenient way to become mortgage-free.
Downsizing helps you to be mortgage-free if the difference in value between your current and new house is higher than this, you should be able to pay off your mortgage.
The advantages of downsizing
In addition to the section above, downsizing has further financial benefits.
Less expensive to maintain
For example, smaller and less valuable properties are typically less expensive to maintain.
Therefore, not only will your mortgage payments reduce, but your regular utility payments may also decrease.
Get useful house features
Downsizing may also enable you to purchase a property with beneficial features. Perhaps something you hadn’t required when buying your home initally.
For example, if you are nearing retirement age, you may benefit from a ‘more accessible’ home, such as wheelchair-friendly access and a stair lift.
Gain cashflow
You may have some extra cash to spend after downsizing from a larger property to a smaller one.
This means that, besides paying off your mortgage, you could use any remaining cash to live the dream retirement lifestyle you’ve always wanted.
Alternatives to downsizing your home
Many people seek to downsize their homes for financial reasons.
However, other options may be available to you to help you achieve the financial situation you are looking for.
Equity release
Equity release is a common option for homeowners who are nearing retirement age.
This can enable you to access some of the value of your existing property, without having to sell it altogether.
Rent out a room
You may also choose to rent a room of your in your property out.
While some people nearing retirement age do not opt for this, others enjoy forming new friendships. This option will also provide you with some extra income.
Rent out property
Some homeowners may choose to rent out their entire property. This is a common option for people in retirement who want to move to another country (albeit temporarily).
Your new rented residence in the new location is up to you – and you may choose to downsize if you wish.
However, this option can enable you to continue paying off your mortgage while using your savings to enjoy life in a new place.
How to downsize your home
Consider your decision
It is important that you give a lot of thought to downsizing your property before you initiate the process of doing so.
Once you have sold your current house, there is no turning back, and you may be upset about losing a place with so many memories.
Decide what kind of property you want
You should also consider what type of property you want.
For example, bungalows are a popular choice for retired individuals who are downsizing – but this type of property is not always easy to find.
You may also wish to consider a Park Home or a Retirement Village as viable options.
Find a good estate agent or other house seller
Whichever you prefer, you should be clear on this decision before approaching an estate agent. This can make the process quicker and successfully narrow down your options.
Once you have contacted an estate agent, they will take you through the usual buying and selling process.
You can also consider alternative house-selling options like property auctions or cash house sellers.
Consider furniture
Next, you should assess which furniture can be taken into your new property.
This may be a challenge because, due to you downsizing, only some things will fit.
Hire a removal company
Once an exchange of contracts takes place, you will need a removal company to move your belongings to your new property.
This should be booked several weeks or months in advance.
