The best years of your life are approaching. It is often very exciting to announce your retirement, and embrace all the freedoms that come with the change in lifestyle.
However, during this transition in your life, many people question whether they should sell their house and start renting.
There are pros and cons to the decision to do this – and we have outlined the main points below.
The reasons to sell your house and rent when you retire
Selling your house can sometimes cause upheaval in the short-term, but in the long-term it can provide you with the funds you need for a dream retirement. After all, if you sell your property and rent in a less expensive location, you will have saved a significant amount every month.
This decision may make sense for you if you initially bought your property when you were raising children/grandchildren, who have since moved out, and you therefore have lots of unneeded space in your current property.
In addition to this up-front saving, selling your house means that you free yourself from any landlord-related expenses. This can include:
- Property taxes
- Home insurance
- Maintenance costs
- Utility bills (e.g. gas, electric, water etc.)
Not only does the maintenance of your house come with a financial cost, but it can also be physically and emotionally draining for you. As you move into the twilight years of your life, selling your house and renting can enable you to remove this headache.
Selling your house to start renting also allows you to move wherever you want, whenever you want – which is ideal for many people in retirement.
An additional explanation for people approaching retirement selling their property is so they can free up equity. This is because you can use the proceeds of your sale to boost your pension pot, or give you additional options on how to deal with your estate during your lifetime.
The negatives of selling your house to rent
Although there are advantages to selling your house and renting when you retire, there are also drawbacks.
Some of the negatives are emotionally-driven – for example, you may have become deeply attached to your house, and therefore don’t want to sell it. Furthermore, you may have developed a strong sense of community with your neighbours. In this latter scenario, selling your house to rent in another area may mean saying goodbye to not just your house, but some of your closest friends, too.
If you intended to pass your property on to a family member, then while selling your house to rent and retire may make financial sense for you, it would not for the person you intended to pass it on to. You would be removing the opportunity for your loved one to (in the near future) own a home mortgage-free.
You may also be less inclined to sell your house and rent elsewhere if your home has been modified for your needs. For example, some people approaching retirement need a stairlift to go up the stairs – and if your property already has one fitted, it can be inconvenient and time consuming to search for another house with the same feature.
Inheritance Tax Considerations
As well as the reasons listed above, both for and against selling your house and renting when you retire, you should also consider how inheritance tax could impact your decision.
Inheritance tax is only charged on an estate valued at over £325,000. Therefore, if yours is beneath this sum, then you do not need to worry.
One way you can avoid inheritance tax is by gifting your property to family members, while you are still alive. However, this option is only financially beneficial if you move out of the property, and live for another 7 years before it is inherited.
Although you can keep living in your property after you have gifted it, you cannot do so without paying rent. For the house to be discounted from any inheritance tax calculation after the seven year period, you need to keep paying rent.
Sell your house fast
Everyone wants to sell their house fast, and avoid the common headaches of selling on the market. You can do this, and get started on your exciting retirement, by selling with WeBuyAnyHome.
We are a cash house buyer that sells your property quickly in any timeframe. No fees, no hassles and no delays.