Here’s 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. You could sell up and downsize to a smaller property or, if you’re 55 or over, release the equity you’ve built up by taking out a loan secured against your home, often referred to as a lifetime mortgage.

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 be also affected by VAT. We recommend that you always shop around to find the best deal for you.

 

Downsizing 

Lifetime mortgage

Surveys 

If you’re buying your new home with a mortgage, then your lender will require a property valuation. The cost of a basic valuation starts at £150, but some lenders will carry out the valuation for free.

You’ll also need a house survey on your new property. A basic Condition Report survey will cost from £250, while a Building or Full Structural Survey, if required, could cost upwards of £600. 

The cost of a basic valuation starts from £150 but could cost up to £1,500 depending on your valuer and size of your property. Some lifetime mortgage lenders will do the valuation for free.

Legal fees and local searches

Typically £850- £1,500 for solicitor fees for buying and selling. And £250-£300 to check whether there are any local plans or problems around your new home. 

Typically £600-650 for a solicitor who’s an equity release specialist, and no additional need for local searches.

Electronic transfer fee

Around £40- £50 to transfer funds at completion. 

Around £40 - £50 to transfer funds at completion.

Estate agent’s fees 

Commission fees will usually be between 0.75% and 3% (plus VAT) of the selling price of your home. A fixed fee deal with an online agent may be cheaper.

Not required

Stamp duty

Up until 31 March 2021, if you’re buying a home in England or Northern Ireland, you won’t pay Stamp Duty on your main home if it costs less than £500,000. If your new home costs more than this, you’ll pay between 5% and 12% on the portion of the purchase price over £500,000.

Not required

Leaving an inheritance  

Buying a smaller property may mean that it is worth less than your current property. Meaning 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 have. 

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.

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.

Meaning your ongoing costs of your mortgage repayments could be significantly reduced or removed completely!    

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.

Equity release 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 to move your mortgage from one property to another, or for advice on how to remortgage.  

Mortgage advisers will normally charge a percentage of the loan amount. It’s a good idea to shop around for your advice as costs can vary.

You will need to seek financial advice in order to take out an equity release product. Some mortgage advisers charge a fixed fee for advice, others may charge an advice fee that is a percentage of the total loan amount.

It’s a good idea to shop around for your advice as costs can vary. If you choose to take out one of our equity release products then we don’t charge an upfront fee for our advice.

 

Selling 

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. 

There will be no need to go through the selling process, however 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.

 

What are the pros and cons of equity release?

We've put together a helpful list of pros and cons to consider if you're interested in taking out one of our lifetime mortgages.

What's right for me?

Downsizing or releasing equity is a major life decision. Here’s a useful checklist to help you make up your mind and consider what’s best for you and your family. 

 

 

Downsizing  

Equity release 

Friends and family 

You might be moving to a new area, it might be difficult to find friends and social activities you enjoy.  

Or the move may give you the opportunity to move closer to family members. 

Nothing would change.

If you choose to downsize or release equity you could consider using the funds released (or acquired from downsizing to a cheaper property) to help you extend your home to better suit your needs. For example, you might want to add an extra bedroom for when children and grandchildren come to stay.

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? 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 would change.

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.

Equity release is a loan secured against your home. 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.