03 Jun 2024

Downsize or equity release?

Here are some of the things to think about if you’re considering downsizing or taking out a lifetime mortgage, a form of equity release.

When you’ve worked hard to own your own home, there comes a time when it can work hard for you in return.

If you’re looking for ways to access the money tied up in your home, you could think about selling and downsizing.

But for many of us, moving away from loved ones or our local community isn’t quite right for us. A lifetime mortgage might be a better option. This means taking out a loan secured against your home, and releasing tax-free cash. There’s plenty to consider, whatever you decide.

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Is equity release right for you?

If you’re considering equity release over downsizing, our easy to use calculator can help you discover how much you can release.

How much could it cost? 

It’s important to weigh up all the costs and effort when you’re deciding which option is right for you. Here’s a handy checklist of some of the costs involved to help you decide what suits your needs. 

All fees and costs stated may vary and may also be affected by VAT. We recommend that you always shop around to find the best deal for you. These are based on our fees in June 2024.

  Downsizing  Lifetime mortgage
Mortgage fees

If you're buying a home with a mortgage, you'll probably have to pay an arrangement fee. These are usually between £999 and £1,999. You might find a mortgage offer that's fee-free - but it may come with a higher interest rate. You can choose to add this fee to your loan, but you will pay interest on it.

An arrangement fee covers the cost of setting up your lifetime mortgage. It's usually around £599 and is payable on completion and deducted from the cash amount released to you. You can choose to add this to your lifetime mortgage, but it will increase the amount you owe, and you will pay interest on it.

Valuations and surveys

If you’re buying your new home with a mortgage, then your lender will require a property valuation. These are usually included in the price of the sale.

You’ll also need a home survey on your new property. These are usually between £500 and £1,500, depending type of survey you choose.

The cost of a basic valuation starts from around £125 but could cost £2,500+ depending on the size of your property. Some lifetime mortgage lenders will do the valuation for free.


Legal fees  Your solicitor will take care of the legal aspects of the buying process. They'll either charge you a flat fee or a percentage of the value of the property - you can expect to pay between £500 and £1,500. This will include checks to see whether there are any local plans or problems around your new home. Typically around £860 for a solicitor who’s an equity release specialist.
Electronic transfer fee This should be included in your legal fees. Around £30 to transfer funds at completion. This will be deduced from your lifetime mortgage.
Estate agent’s fees  Commission fees are currently around 1% (plus VAT) of the selling price of your home, however every estate agent sets their own fees and they are often negotiable. Not required.
Stamp duty You won't pay any Stamp Duty if you buy a residential property for less than £250,000. If your new home costs more than this, you’ll pay between 5% and 12% on the portion of the purchase price over £250,000. You can learn more at gov.uk/stamp-duty-land-tax. Not required.
Ongoing costs and debts 

You may choose to downsize to a smaller property to reduce your mortgage payments, or so you can be mortgage-free.

This means that your ongoing mortgage repayment costs could be significantly reduced or removed completely!    

If you repay your mortgage early there may be an early repayment charge.

Not only could you release money from the sale of your house, but you could also save more money. A smaller home will likely mean lower energy bills and cost less to maintain.

With a lifetime mortgage you can choose to pay all, some, or none of the interest due. Any unpaid interest is added to the loan each month. Interest is then charged on the initial loan amount plus the added interest meaning the amount you owe will build up quickly.

A lifetime mortgage is a form of debt secured against the value of your home, meaning that you will owe money to your equity release provider. This money is repaid when your property is sold when you die or go into long term care.  

Advice fees 

It might be a good idea to chat to a mortgage adviser before you make any decisions.  

Mortgage advisers will normally charge a percentage of the loan amount. Shop around for your advice as costs can vary. 

You can only take out a lifetime mortgage through a qualified financial adviser. Some advisers charge a fixed fee, others may charge a percentage of the total loan amount.

It’s a good idea to shop around for your advice as costs can vary. You can find an adviser near you at Unbiased

If you choose to take out one of our equity release products then we don’t charge an upfront fee for our advice.


There are a number of considerations when selling your home. For instance, it might take you longer than expected to find a buyer. This would put your plans on hold and cause frustration. The offers you receive might not be what you expect, which will impact on your budget for finding a new home. 

Depending on your circumstances, you may also need to consider removal fees.

Though you won't need to go through the selling process, there will be other considerations with taking out a lifetime mortgage. For instance, your property will need to be valued and you’ll also need to seek legal advice.

How does equity release work?

Find out more about equity release and how much you could release with a lifetime mortgage, a loan secured against your home.

What's right for me? 

As well as the financial implications of downsizing or releasing equity from your existing home, you need to consider the impact on your family and lifestyle. 

  Downsizing  Lifetime mortgage
Friends and family

Moving to a new area might bring challenges in the form of finding new friends and social activities. 

Alternatively it could allow you to move closer to family.

A lifetime mortgage can be used to buy a new property, allowing you to move closer to friends and family. Or you can take one out to stay in your current home. If you do decide to move at a later date, you may be able to port your lifetime mortgage to the new property.
Leaving an inheritance 

Buying a smaller property may mean that it is worth less than your current property. This means that when you’re gone, the sale of your home will leave a smaller inheritance for your family

Or, you may choose to put aside the money accumulated from downsizing, and gift this to your loved ones. You’ll need to check the rules around gifting money, and Inheritance Tax, if you’re considering doing this.

Equity release creates a debt secured against your home which will need to be repaid from the sale of your home, usually when you die or if you have to move out of the home and into long-term care. This will reduce the amount of inheritance you leave. You may be able to take out inheritance protection, to set aside an amount for your loved ones.

Or, you may want to choose to gift the money released from the equity in your home. You’ll need to check the rules around gifting money, and Inheritance Tax, if you’re considering doing this.

Your home  Is it suitable for downsizing? Perhaps it’s just the right size for you already, or moving to a smaller home might mean compromising your living space. Is it suitable for your lifestyle? Perhaps your home would benefit from some changes to suit your needs? Maybe the kitchen needs updating or the garden made easier to maintain? Perhaps you could add an extra bedroom for when the grandchildren come to stay? You could use some of the money from a lifetime mortgage for this. 
Are you ready to let go?  Preparing a home for sale, decluttering and getting rid of furniture and other items can be difficult, even stressful.  Nothing will change, so if you want a smaller, more manageable property this may not be the option for you.
Settling into a new area You will probably have to find a new GP and dentist, and there will be some personal admin to do, such as changing contact details with banks, official organisations, and so on. This may take some time and effort- but could be well worth it for a new home you love. Nothing would change.


Choosing between downsizing and equity release

Think carefully before you make such a major decision. We have more information on equity release which can help you understand what equity release is, what some of the pros and cons are and the equity release options we can offer you.

It's important that you make the decision that feels right for you. So when you're ready to ask any of the questions you may have about the cost of equity release or how a lifetime mortgage can impact inheritance, we can help. 

A lifetime mortgage is a loan secured against your home, designed for people aged 55 and over (or 50 plus for our Payment Term Lifetime Mortgage). There may be cheaper ways to borrow money. If you gift the money away, the recipient may need to pay inheritance tax in the future.

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