You are here: Home - Equity Release - News -

The winners and losers of the retirement property downsizing race

0
Written by:
31/07/2013
The region you live in can dramatically impact how much equity you could release by downsizing your property.

If you have your hopes pinned on using your property to fund your retirement, then this report is a must-read.

Retirement specialists MGM Advantage have looked at current house prices and calculated the amount of equity released by downsizing from a detached property to a bungalow.

And the numbers show some significant regional differences.

By downsizing from a detached house to a bungalow in the Greater London area, you could potentially release around £238,000 of capital from the house move, once you have deducted moving costs including stamp duty.

The report found that this sum, once grossed up, could generate a monthly income from an annuity of £1,342 at current annuity rates, but you would be giving all your capital to the annuity provider to generate that guaranteed income for life.

Alternatively, if you wanted to retain access to the capital, it could generate monthly interest of around £348 a month at current rates.

At the opposite end of the spectrum, Northern Ireland fares worst. From a similar property move, you could generate around £24,000, providing a monthly income of around £139 from an annuity or £36 from an interest paying deposit account.

If you compare these numbers with the UK average, moving from a detached property to a bungalow could generate a sum of £84,000, providing an income of £475 from an annuity (once grossed up at 20% tax relief) or £123 a month from a monthly interest paying deposit account.

Andrew Tully of MGM Advantage said: “Using your own home to provide the income for your retirement is an option for people who have no other savings. But, you should never have all of your eggs in one basket, as these figures show significant regional variations in who could benefit from downsizing. People who are able to save should consider other forms of saving, whether that be in pensions or ISAs, rather than banking on your own home to fund your retirement.”

 

How much equity could be released by downsizing your property?

Region

Capital released by moving from a detached property to a bungalow

Monthly income from an annuity (fund at 20% tax relief)

Monthly income from an annuity (fund at 40% tax relief)

Monthly income from cash account

Monthly income from 5-year income bond

UK

£84,776

£475

£570

£123

£194

North

£70,469

£394

£474

£102

£161

Yorkshire and Humberside

£54,854

£310

£368

£80

£125

North West

£87,780

£492

£590

£128

£201

East Midlands

£61,850

£347

£415

£90

£141

West Midlands

£62,319

£349

£418

£90

£142

East Anglia

£68,217

£381

£458

£99

£156

South East

£153,218

£860

£1,034

£223

£351

South West

£66,126

£370

£444

£96

£151

Greater London

£238,690

£1,342

£1,608

£348

£547

Wales

£71,105

£398

£478

£103

£162

N. Ireland

£24,745

£139

£167

£36

£56

Scotland

£49,717

£282

£335

£72

£113

 

 

 

 

 

 

 

 

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your Mortgage Guides

Your Mortgage Award Winners 2021-2022

Read our guide to the best mortgage lenders in the UK

Read More >