Short answer: downsizing and equity release are two different ways to use the value in your home. Downsizing means moving to a cheaper property. Equity release means taking money from your home while you keep living in it. Each has costs and trade-offs, so speak to a regulated adviser before you decide. This is general information, not financial advice.
Two ways to free up money from your home
- Downsizing. You sell your home and buy or rent somewhere smaller or cheaper. The money released is yours to use, but you pay the costs of moving.
- Equity release. You take money from your home without moving. The main types are a lifetime mortgage, where you borrow against your home and interest builds up, and a home reversion plan, where you sell part or all of your home in return for a lump sum or income.
Costs and trade-offs of downsizing
Moving has real costs, including estate agent and solicitor fees, removals and, on a purchase, tax. Independent Age notes that moving costs can be high and that tax may be payable when you buy. See our guide to stamp duty when downsizing and what to budget for when moving house.
Things to check with equity release
- Interest on a lifetime mortgage usually builds up over time, so the amount owed can grow.
- It can reduce what is left for your family.
- It may affect your entitlement to some means-tested benefits.
- Check that the product is regulated and that you receive advice from a firm authorised by the Financial Conduct Authority. MoneyHelper offers free, impartial guidance.
How to decide
Start with what you want: to stay put, to be nearer family, or to free up money. List what each option costs and what would be left, then take regulated financial advice and legal advice before committing. If moving is the right choice, the practical planning is where Chayce helps.
Where Chayce fits
Chayce arranges the practical side of a later-life move: sorting, packing, the removal, estate agent and solicitor liaison, and settling in. We cannot give financial advice. See our downsizing guide and downsizing help for older people, or get in touch.
Sources
Products, rules and tax change. This article is general information, not financial advice.