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Using equity in calculations

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Hi folks
As I plan for an early retirement, my eyes are drawn to the equity I have in my property which once we trade down will add a 6-figure sum to the pot. 
Is it good and/or common practice to include this in the planning calculations?
Thanks for your input. 

Replies

  • AlanP_2AlanP_2 Forumite
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    I would think most people do not trade down just before or in early retirement so probabaly not common practice.

    If you know you definitely will trade dwon then include the cash that is freed up but if it's a "maybe" then don't would be a conservative approach. 
  • 8370562883705628 Forumite
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    Generally bad practice. It's fun to work out your total wealth including the house but I think most IFAs would advise against this. Also a normal remortgage may make  you better off than going with a product that advertises itself as equity release. There's guides on the site to help you out.
  • AlbermarleAlbermarle Forumite
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    Generally bad practice. It's fun to work out your total wealth including the house but I think most IFAs would advise against this. Also a normal remortgage may make  you better off than going with a product that advertises itself as equity release. There's guides on the site to help you out.
    The OP indicated it would be a trade down to a smaller property , rather than a remortgage /equity release.
    In this case , once the transaction is complete, then it would be normal to include the released equity as free funds.
    Either for spending/keeping as cash/invested.
  • 8370562883705628 Forumite
    482 posts
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    Generally bad practice. It's fun to work out your total wealth including the house but I think most IFAs would advise against this. Also a normal remortgage may make  you better off than going with a product that advertises itself as equity release. There's guides on the site to help you out.
    The OP indicated it would be a trade down to a smaller property , rather than a remortgage /equity release.
    In this case , once the transaction is complete, then it would be normal to include the released equity as free funds.
    Either for spending/keeping as cash/invested.
    Ah, wasn't clear sorry 😅
    In that case you could include it but I wouldn't make firm plans using that number until after a sale had completed.
  • coyrlscoyrls Forumite
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    You would need to keep an eye on house prices and factor in moving costs to maintain a realistic view of the amount that you could release through trading down.  It's easy to exaggerate the benefits of trading down.
  • AlbermarleAlbermarle Forumite
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    coyrls said:
    You would need to keep an eye on house prices and factor in moving costs to maintain a realistic view of the amount that you could release through trading down.  It's easy to exaggerate the benefits of trading down.
    I guess when you start the process to trade down and start looking for properties , then you start at one level and then start thinking 'wouldn't it be nice if it had a bigger garden/better view /nicer area/ Waitrose instead of Tesco ' etc.
    Could well end up moving to a smaller property but in a more expensive location  and not having as much left over as you originally planned.
  • ThrugelmirThrugelmir Forumite
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    Why would you leave it out from your calculations? Though until you actually do downsize. The amount remains uncertain. 
    “Buy value, not market trends or the economic outlook. Individual stocks determine the market, not vica versa." - Sir John Templeton
  • MalthusianMalthusian Forumite
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    The other thing to bear in mind is that selling a property can take a while, sometimes years. Property sales fall through, stuff like Covid happens, the person who owns the house of your dreams decides they'd rather stay where they are.
    Most retired people tend to be picky, and they should be. When you're not going to run out of money in the short term (and very few people would be relying solely on downsizing proceeds to live on), and not committed to moving in a particular timeframe by work / school terms, you can afford to take your time. It's not uncommon for this long search to turn into staying where they are.
    So if downsizing is likely, it should be included in the calculations but under "future windfall", not as a part of the initial fund.
  • AIBUAIBU Forumite
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    Thanks for all of the helpful replies.


  • AnotherJoeAnotherJoe Forumite
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    If its six figures, over £100k then yes I'd include it but err seriously on the side of caution. 
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