How easy is it to upsize to a larger, detached home in retirement?


older couple receive the keys to a new home

If you’re thinking about retirement, one of your goals might be to move to a larger home. In fact, upsizing has become an even more common goal thanks to the pandemic, since “the race for space” has seen many people seek properties with more living and garden space.

But with house prices rapidly on the rise, and detached houses rising faster than any other type of property, upsizing may not be as easy as it once was.

So, what are the financial implications of moving upsizing in retirement, and could it be feasible for you? Read on to find out.

Detached properties cost 17% more than they did pre-pandemic

Property prices in the UK can vary depending on where you live. For example, Which? have found that a detached property in Northern Ireland costs an average of about £217,000, but the average value of a detached property in London is £910,000.

Across the UK as a whole, the average price of a detached property is £425,177, 17% more expensive than in March 2020.

If you have owned your home for many years, you may have benefited from the continuing rise in house prices. For example, house price charts from PropertyData show that the average house price in December 2011 was £167,048.

A decade later, in December 2021, the average house price was £274,712. That means that, on average, your home may have increased in value by more than £100,000 over a decade.

With prices continually rising, one of the main things to think about before upsizing is how much the sale of your current home will help with the cost of your new one.

If your home has grown significantly in value, you may be able to cover a larger portion of the purchase with the sale of your current home. However, your desired property may also have increased in value significantly, so the differential may have been maintained.

Plus, looking for a larger home means that you are likely looking at a more expensive property if you are staying in the same area, which means you may need to secure a mortgage.

Mortgages can be harder to secure in later life

If you are already retired, securing a mortgage can be more difficult. Some providers will offer you a deal if you can prove, through your retirement fund and investments, that you will be able to afford the repayments.

Even if you aren’t already retired, some mortgage deals have an upper age limit attached to them, meaning your term will have to end before a certain age.

Much will depend on the “loan-to-value” ratio you wish to borrow. If you are putting down a large deposit and only borrowing a small proportion of the property value, you’re likely to find a wider choice of lenders willing to agree the mortgage you need.

A mortgage may put an unnecessary strain on your pension pot

A very common financial goal is to be mortgage-free by retirement. After all, your mortgage is probably the largest financial commitment you will have in life, so wanting to clear it before you stop working makes sense.

However, retaining your mortgage into retirement could put an unnecessary strain on your pension pot, as you would have to make a large monthly payment from your retirement income.

Paying hundreds of pounds each month may prevent you from achieving all the goals you had for your retirement. You might have to cut back on your plans in favour of making your mortgage repayments.

Having a mortgage could severely limit your financial freedom in the early years of your retirement, but it could also be the right choice for you. As such, contact a financial professional in order to decide whether taking a mortgage in later life could be right for you.

We can help you weigh up the pros and cons of doing so and help formulate a saving and investing plan to help you afford and still live the life you desire in retirement.

For more information on how we could help you and your financial situation, please email or call 0115 933 8433.

Please note

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.

Think carefully before securing other debts against your home.