The two routes in one sentence each
Downsizing: sell, buy something cheaper, keep the difference. You own the new home outright and owe nothing. It costs £20,000 to £30,000 in moving costs and you have to move.
Equity release (usually a lifetime mortgage): borrow against your home, stay in it, make no monthly payments. The interest is added to the loan and the whole lot is repaid when the home is sold after you die or move into care. It costs nothing up front beyond fees, but the debt grows every year.
A worked example
A £450,000 home, a couple aged 70, wanting £100,000
| Downsize to £300,000 | Lifetime mortgage of £100,000 | |
|---|---|---|
| Cash in hand | About £128,000 after moving costs | £100,000 less fees of £2,000 to £3,000 |
| Monthly payments | None | None (optional) |
| Debt after 15 years at about 6% | £0 | Roughly £240,000 |
| Home left to the family after 15 years, if prices are flat | £300,000 plus whatever cash is left | £450,000 minus £240,000: about £210,000 |
| Running costs | Lower (smaller home) | Same as now |
| Upheaval | A move | None |
The numbers are illustrative. Rates vary, house prices move, and lifetime mortgages now let you pay some or all of the interest to slow the growth. But the shape is always the same: downsizing costs you once, equity release costs you every year.
When equity release makes more sense
- You love your home and the area and do not want to move, full stop.
- Your home is hard to sell or the difference between it and something suitable is small.
- Leaving a large inheritance is not a priority, or you have talked to the family and they agree.
- You need a modest sum, or a drawdown facility to take small amounts as you go, rather than a lump.
- You are older. The older you are, the more you can borrow and the less time the interest has to roll up.
When downsizing makes more sense
- The house is too big or too hard to manage anyway.
- You want the maximum money and no debt.
- Leaving something to the family matters.
- You are relatively young (in your sixties), when a lifetime mortgage would have twenty-plus years to compound.
- You would like to be somewhere else: nearer people, on one level, in a better area.
Safeguards if you go the equity release route
- Use an Equity Release Council member: a no-negative-equity guarantee, the right to stay for life, fixed or capped rates, and the right to move the loan to another suitable home.
- Advice is compulsory. Use an adviser who is independent and looks at the whole market, and ask how they are paid.
- Take only what you need now; use drawdown for the rest.
- Check the effect on means-tested benefits before you take the money.
- Involve the family. Surprises after a death are where the bitterness comes from.
A third option sits between the two: a retirement interest-only mortgage, where you pay the interest monthly so the debt never grows. It needs enough income to keep the payments up for life.
A note on the numbers. Tax thresholds, benefit limits and typical costs are correct as far as we know at the time of writing (2026) and, unless we say otherwise, are for England. Scotland, Wales and Northern Ireland differ in places. Rules change and your circumstances matter. This is information, not advice: check the current position and talk to a solicitor, an FCA-authorised adviser or a tax professional before you act.
Quick answers
How much does equity release cost?
The main cost is the interest, currently in the region of 5.5% to 7% fixed for life, compounding. Set-up fees, valuation and legal costs are usually £2,000 to £3,500. Early repayment charges can be significant if you want to clear it in the first few years.
Can I downsize later if I have taken equity release?
Usually yes. Equity Release Council products let you move the loan to another suitable property, or repay it from the sale (sometimes with a charge). Some homes, such as retirement flats, may not be accepted.
Which leaves more for my children?
Almost always downsizing, because there is no growing debt. The exception is a rising market where the house you kept grows faster than the loan, which nobody can promise.
Get the free downsizing checklists.
Six printable PDFs: the self-check, the ups and downs worksheet, the step-by-step plan, the money planner, the gifting-a-deposit guide and the room-by-room declutter list. Free, in your inbox in a minute.