Equity release vs downsizing: how they compare

Equity release vs downsizing comes down to one trade-off. Downsizing releases cash from your home with no ongoing interest, but means moving. Equity release lets you stay in your home, but interest usually builds up on the loan and reduces what you eventually leave. Neither is right for everyone; they solve different problems.

This guide is information, not advice.

Equity release vs downsizing: the core difference

Downsizing means selling your home and buying a smaller or lower-value one, releasing the difference as cash. There is no interest or ongoing cost attached; the money is simply yours.

Equity release means borrowing against your home's value while you continue to live there. With a lifetime mortgage, the most common type, interest is usually added to the loan and compounds, and the total is typically repaid from the sale of your home when you die or move into long-term care. You get money without moving, but the amount owed grows over time.

Cost comparison: a worked example

This example is illustrative only. Take a couple with a £450,000 home who want to release around £100,000.

Downsizing route

• Sell for £450,000 and buy a replacement for £330,000, a £120,000 difference.
• Stamp Duty Land Tax on the new purchase at 2026/27 standard rates in England: about £6,500.
• Estate agent fees, assuming 1.5% of the sale price for this example: about £6,750.
• Solicitor fees, removals and incidentals, assumed at £3,000-£5,000 for this example.
• Net cash released: roughly £102,000-£104,000, with no ongoing cost.

Scotland and Wales use different property taxes.

Equity release route

• Release £100,000 as a lump sum at an illustrative fixed rate of 7% a year.
• Advice, arrangement, valuation and legal fees: typically £1,500-£3,000 in total, according to MoneyHelper.
• Amount owed after 20 years if no repayments are made: roughly £387,000.
• Ongoing cost: compounding interest for the life of the plan, unless you make voluntary repayments where the plan allows.

The immediate cash is similar. The long-term picture is very different: downsizing has a one-off transaction cost, while equity release has a lower upfront cost but a growing debt. You can try your own numbers with our equity release calculator and downsizing calculator.

When each option may fit

Downsizing may be worth exploring if:

• You are open to moving, or would welcome a smaller, easier-to-manage home.
• You want a one-off release of cash with no ongoing cost.
• Leaving as much of your estate as possible to family matters to you.

Equity release may be worth exploring if:

• You want to stay in your current home long term.
• Moving is impractical because of health, location or family ties.
• You have considered the alternatives and understand how compounding interest affects your estate.

Downsizing has its own drawbacks: the cost and stress of moving, and the challenge of finding a suitable property. Our guide to downsizing vs staying put looks at these in more detail. Either route can affect means-tested benefits if the money released is held as savings.

For four example situations worked through one by one, see should I downsize or release equity?. If you are leaning towards a move, downsizing to release equity: costs and practical steps covers the sale, the purchase and what you are likely to be left with.

The inheritance question

This is often the deciding factor. Downsizing leaves the rest of your home's value untouched; only the cash you release, and how you spend it, affects your estate. Equity release reduces your estate by whatever the debt has grown to when your home is sold, which can be substantially more than you borrowed.

Plans from Equity Release Council members include a no-negative-equity guarantee, meaning the amount owed cannot exceed your home's sale value, subject to the plan's terms.

Can you combine both?

Sometimes. Some people downsize first, then later take out a smaller equity release plan on the new home if they need more money. Because less is borrowed, less interest compounds, but you pay moving costs and plan fees. It is worth discussing with an adviser whether combining the two, choosing one, or another option such as a retirement interest-only (RIO) mortgage fits your situation. Our guide to when equity release or downsizing makes sense explains more.

Next steps

An adviser authorised by the Financial Conduct Authority (you can check the FCA register) can model both routes against your actual numbers before you decide.

Not sure which option fits your circumstances?

Explore Your Options

Written and reviewed by the Later Life editorial team. Last updated 27 September 2026.