If you are retired, or plan to retire in the not-so-distant future, you may be considering ways to wind down, and streamline your financial commitments, so that you can enjoy the retirement you deserve. One way to do this is to utilise your property. Your home is likely to be the biggest asset you own, so options like downsizing, renting, or releasing equity are great ways to limit your commitments financially.
Before you make any lasting decisions, there are a number of important questions you must ask yourself first, for example:
- Is downsizing the best option for me?
- Will I benefit more from renting?
- Should I release equity from my home?
- Will changing the area I live in contribute to a more comfortable retirement?
- How can I stay in my home but deal with any debts I might have?
This Property and Retirement Guide looks to answer these questions, whilst providing some practical tips for moving seamlessly into retirement.
A lot of homeowners find themselves living in houses that are deemed ‘too large’ when they head towards retirement, often because their children have moved out and into their own properties. If you’re an ‘empty-nester’ with too much space and are prepared to move to a smaller property, selling your property and downsizing could put you in a very comfortable financial position for your retirement – especially if you have owned your property for a long time, as the value is likely to have increased.
Moving out of your existing property to downsize could also provide you with the opportunity to live somewhere that caters better for your needs as you grow older. Aside from a smaller home, you might wish to consider some alternative housing options, such as a single storey property, a retirement property or perhaps somewhere abroad.
However, before committing to a sale it’s important to consider the overall cost of moving home and the time it may take. Calculate exactly how much money you would like to take away from the sale of your home, factoring in the below associated costs, as you may find that it is not as lucrative as you thought it would be. You should also research the property market in your area and assess how well it is performing. If the market is slow, you may need to put your retirement plans on hold and prepare for a lengthy, drawn out sale process.
Costs on completion:
- Estate agent fees – these can cost anywhere between 0.75% and 3% of the agreed sale price
- Stamp duty tax – the rate of stamp duty you pay depends on the price of the property and can range from 0% to 12% of the agreed sale price
- Solicitors fees – legal fees are typically between £850 and £1,500
- Survey fees – this cost is based on the value and size of the property, and usually falls between £150 and £1,500
- Land Registry fee – these fees depend on how much your property is worth, and can fall anywhere between £30 and £910
Costs after completion:
- Removal costs – removal companies tend to charge an average of £50-£60 per hour
- Service charge – the average amount a leaseholder can be asked to pay could fall between £1,000 and £2,000 per year
- Council tax – this depends on how much your local council charges and the valuation band that your property falls under, and can range from £850 to £2,000 per year
- Ground rent – Some modern flats could charge £200 to £300 per year, whilst others may be as low as £10 per year
In addition to the above, it is also sensible to think ahead and check if the property will need new furnishings. Homeowners often overlook the fact that they will need to buy furniture or utensils for a new home, which can result in a large sum once you’ve added it all up.
If you want to free up a significant chunk of money, you could always sell your existing property, find a new home to rent, and enjoy all the proceeds.
While many people see renting as an inconvenient financial commitment and a ‘step back’ from being a homeowner – in actual fact, renting a property can incur less costs and be a lot less stressful than owning a property. This is because property maintenance costs – such as building insurance (to cover the building’s structure), ground rent and repair bills for damages – become the responsibility of your landlord, which can relieve some of the financial burdens associated with owning a property.
Renting can also offer a degree of flexibility that buying a property simply doesn’t. For example, you may wish to rent a property for a year, and then embark on a world cruise the year after once your contract has expired. Or, perhaps you’d like to rent in a more expensive part of the country where you could not afford to buy previously.
WHERE TO RETIRE IN THE UK
If you do decide to sell your existing property to downsize or rent, you will want to ensure you retire in style and comfort. According to the latest Quality of Retirement Index – which ranked 55 counties in the UK based on the size of pensioner population, access to healthcare, crime levels, healthy lifestyle data, pension income, disability-free life expectancy and weather – below are the top retirement spots in the country, which you may wish to consider:
According to the Quality of Retirement Index, West Sussex is the best place to retire in England and Wales, having scored highly in most of the above categories. With iconic landmarks such as Arundel Castle and Fishbourne Roman Palace situated within the border, West Sussex has always had plenty going for it. Average house price = £350,000
Dorset has, for many years, been considered one of the leading places for people to retire to in the UK, due to its fantastic health care services, sandy beaches, and happy holiday atmosphere. This location came second in the Quality of Retirement Index due to its high retirement population and warm coastal weather. Average house price = £310,000
An ‘up and coming’ area for retirees is East Sussex, where there’s plenty of countryside walks and beautiful landscapes. The area reported a high inflow of retirees and good weather however, its crime ratings are something to take into consideration. Average house price = £325,000
Devon is the home of beautiful beach walks, cream tea and an abundance of sunshine, which makes it an idyllic place to retire to. The county currently welcomes more pensioners than any other area in England & Wales and, according to the Quality of Retirement Index, boasts a low crime rate. Average house price = £249,500
In addition to miles of beaches, fantastic coastal walks, and a high concentration of medieval churches, Norfolk is a great place to retire due to its low levels of crime, good weather and a high population of retirees. Average house price = £240,000
North Yorkshire has long been considered one of the best places for people to retire to in the North of England. You would have to compromise on the climate, as the weather is often subject to strong winds and rain, however the beautiful green landscapes of this non-metropolitan county certainly make up for it. Average house price = £228,249
According to the Quality of Retirement Index findings, Suffolk continues to attract new retirees to the area, due to its rainbow beach huts and vibrant community. You can get plenty for your money in the area too, which means more space for the grandchildren or dogs to run around. Average house price = £259,960
ISLE OF WIGHT
The Isle of Wight is celebrated for its sandy beaches, sea font promenades, and beautiful nature parks. Retirees who would like to live in an area with people of a similar age should definitely consider this island off the South coast, as more than one in four of the population is aged 65 or over. Average house price = £230,000
The weather might not be wonderful all year round, but in terms of life expectancy, Worcestershire is hard to beat, after being ranked as having the third-highest life expectancy in the country. The property market is also very affordable, with lively arts clubs, walking and altitudinous views to keep residents occupied. Average house price = £250,000
When it comes to health and lifestyle standards, Oxfordshire finds itself at the top of the list. Although there isn’t a high population of retirees, there is a friendly community and the properties here are highly sought after. A great place to retire for a latte and lunch lovers. Average house price = £399,000
STAYING IN YOUR HOME
If selling your family home isn’t an option or something you’re prepared to do, there are some alternative choices you may wish to consider, which could allow you to keep your property and enjoy your retirement at the same time.
Equity release schemes allow homeowners to tap into the wealth they have accumulated in their property, without the hassle of having to move out. There are two main types of equity release – lifetime mortgage and home reversion.
With a ‘lifetime mortgage’ you can borrow a proportion of your home’s value. Interest will be charged on the amount borrowed, but nothing will have to be paid back until you sell your home or pass on. It is important to note however that the interest will be compounded over the period of the loan meaning that your debt could double over a decade.
With a ‘home reversion’ scheme you can sell a share of your property to a bank provider for less than the market value. You have the right to stay in your home for the rest of your life if you wish, but when you pass on or move out of the property it will be sold and the provider will get the same share of what your home sells for.
It’s very important for you to consider the pros and cons of each equity release process before making any set decisions, as a property will likely be the most valuable thing you’ll ever own, and you don’t want to lessen the value unless you really have to.
Become a landlord
If your preference is to continue living in your own property, but you need to free up some money for your retirement, you might wish to consider subletting a room or a part of your home. This option is particularly appealing for homeowners with larger houses, or who live in cities where the renting demographic is very high.
Understandably, allowing a stranger into your home can be a daunting prospect, but it can also be a quick and sustainable way to generate some additional income. Who you consider accommodating is entirely up to you, and you are well within your rights to request background and credit checks to help make up your mind.
If you do decide to let out part of your home, you will become a resident landlord, which makes you eligible to enrol in the Government’s ‘Rent a Room Scheme’. By letting out furnished accommodation in your home, this scheme will allow you to earn a threshold of up to £7,500 per year – tax-free!
Reduce your energy bills
Reducing your bills is simpler than you think, and could help to free up some extra cash for you to enjoy during your retirement. The simplest way to keep energy costs down is to monitor the amount you are using and keep it to a minimum.
Your energy supplier will offer a range of tariffs, so it’s worth checking in with them to make sure that you are on the best deal for your household. It’s important that you carry out lots of research into the best providers and what they can offer you in terms of your personal affordability. Don’t be afraid to switch every year to cheaper providers – as this could save you money in the long run.
If you’re struggling to meet payments, some suppliers may offer the option to go on a prepayment meter. These can help you budget more effectively and sit under a current temporary cap to limit the prices you will have to pay.
Re-evaluate your tax
Every homeowner knows that Council Tax is a compulsory, property-based tax that must be paid to local authorities. However, what many people don’t know is that, regardless of your financial circumstances, you might be eligible for a reduction or an exemption of the rate you currently pay. Whilst the amount of discount varies, the following circumstances could mean that you could cut some all-important costs on your taxes:
- Living alone – Council Tax is calculated on the assumption that there are two or more people living in a property at one time. If you’ve found yourself living alone and looking to save money in retirement, you could apply for a 25% discount, regardless of your financial circumstances.
- Carers – If you are caring for your partner or another member of your household for over 35 hours per week, you may find that you are exempt from council tax. If you fit this description you should contact your local authority to see if you are eligible.
- House value – If the value of your property has decreased since you purchased it, you could be eligible to be moved to a lower council tax band. Check if there have been any developments in the area that is responsible for decreasing the value of your property; for example – nearby motorways being built or a new train line at the back of your garden. Contact the Valuation Office Agency if you think your band should be changed.
- Payment plan – Many homeowners aren’t aware that you can ask for your council tax bill to be split over 12 months rather than the standard 10, which will amount to a lower monthly bill. However, if you have recently sold a property and are in the position to pay off the years council tax in one go, you could also be eligible for a discount on the overall total.
- Long term absence – If your property is unoccupied for up to 6 months, you are exempt from paying council tax. This is often the case for people with long term hospital stays – so be sure to talk to your local authority if that is the case.
If you’re heading towards retirement and find yourself in a situation where you need to sell your house fast, we are here to help. At We Buy Any Home, our service provides you with an initial offer within 24 hours of contact – enabling completion on a house sale in as little as seven days, so you can start looking to the future and take the next step in your retirement plan.