Welcome to the fourth video in the Baby Boomer Series – this week we’ll be looking at the issue of downsizing your home.

Downsizing a large family home is becoming a very popular option for releasing capital and reducing living expenses. Many Baby Boomers find themselves owning a huge home thanks to the housing boom of the last thirty years. By huge I refer to the amount of space it takes up and the money it takes to run it. My suggestion is that you talk to your family about downsizing and whether it's right for you and your loved ones.

Let’s think about this: suppose you have a house that’s worth £300,000. If you need some capital released from the  house, now is the time to do it, while you’re vigorous and able to make decisions. If you wait until you are in your seventies it won’t be as easy and will become a much bigger hurdle. Once the hurdle becomes too big, the option of equity release begins to look attractive.

In my opinion, equity release is not the best solution: interest rates are much higher on equity release mortgages (because they are fixed) and the interest charged rolls up over the years. A £25,000 loan can easily become £100,000 over twenty years. If you downsize earlier, you have the opportunity to take the money out of the house, invest it and use it provide income. You also have the option of making gifts to children and grandchildren to help with education costs or providing a deposit to get them onto the property ladder themselves. Or if you prefer you can use the 'SKI'(Spend the Kids' Inheritance!) plan. At least it’s being used for someone’s benefit rather than to a mortgage company.

So what is your action point from today? I suggest that you sit down with the family and have a conversation about downsizing. If you’re hesitant to talk to the family, then start by talking with your other half. The two of you can discuss how you feel about the prospect of downsizing, and how you could go about it cleverly.

And never forget.. your financial planner is always available to help you do just that – make plans that help you to get what you want!

Regards,

Nicholas.