Downsizing your home

People downsize for many different reasons, and yours will shape the type of mortgage or financial plan you need. Understanding your motivation helps an advisor recommend the right approach.

• Releasing equity: moving to a cheaper property lets you unlock cash tied up in your home. You might use it to top up your pension, help children onto the property ladder, or build a financial safety net.
• Reducing monthly costs: a smaller property typically means lower mortgage repayments, cheaper energy bills, less council tax, and reduced maintenance spending. Some downsizers clear their mortgage entirely.
• Lifestyle changes: retirement, children leaving home, or health concerns can make a large property impractical. A smaller, more manageable home can improve quality of life.
• Debt consolidation: some homeowners remortgage or downsize to pay off unsecured debts, though this needs careful advice because you are converting short-term debt into long-term secured debt.

Whatever your reason, a broker can model the numbers and show you exactly how much you stand to gain or save by downsizing.

Whether you need a mortgage after downsizing depends on the price difference between your current and new home, your outstanding mortgage balance, and the transaction costs involved.

If you sell a property for £400,000 with a remaining mortgage of £80,000, you receive roughly £320,000 in net proceeds (before fees). Buying a home for £250,000 would leave you with around £70,000 in cash after covering solicitor fees, stamp duty, and moving costs. In that scenario, you would not need a new mortgage.

However, you might still choose to take out a small mortgage if you want to keep more cash available. A competitive fixed rate on a low loan-to-value mortgage can be surprisingly affordable, and keeping savings liquid gives you flexibility.

If your new property costs more than your net sale proceeds, perhaps because you are moving to a higher-value area, you will need a mortgage to cover the shortfall. Lenders will assess your affordability based on your income, existing commitments, and the loan-to-value ratio of the new purchase.

Downsizing is not free, and the costs can eat into the equity you release. Budget for these expenses before deciding whether to move.

Estate agent fees typically range from 0.75% to 1.5% of the sale price plus VAT. On a £400,000 sale, that is £3,600 to £7,200. Solicitor or conveyancer fees usually run between £1,000 and £2,000 for each transaction, so you pay twice: once for the sale and once for the purchase.

Stamp duty on your new property depends on the price band. In England and Northern Ireland, there is no stamp duty on the first £125,000, then 2% up to £250,000, and 5% up to £925,000. A £290,000 home would attract roughly £2,300 in stamp duty, assuming it is your only property.

Other costs include removal fees (£500 to £1,500), a new mortgage arrangement fee (often £500 to £1,500), and a property survey (£250 to £700). Early repayment charges on your existing mortgage can also apply if you are still within a fixed-rate period.

When you downsize, you pay stamp duty on the purchase price of your new home. In England and Northern Ireland, the rates for 2025-26 are structured in bands.

You pay 0% on the first £125,000, 2% on the portion from £125,001 to £250,000, and 5% on the portion from £250,001 to £925,000. For a £290,000 property, the calculation works out as: £0 + £2,500 + £2,000 = approximately £4,500. However, the exact figure depends on the current thresholds and any temporary reliefs in place.

If you own a second property, such as a buy-to-let, you may face the additional property surcharge of 5% on top of standard rates. You can reclaim this if you sell your previous main residence within 36 months, but you need to pay it upfront.

In Scotland, you pay Land and Buildings Transaction Tax (LBTT) instead, which has different bands. Wales uses Land Transaction Tax (LTT). A stamp duty guide can help you calculate the exact amount for your situation.

Yes, but lending criteria tighten as you get older. Most high-street lenders set a maximum age at the end of the mortgage term, typically between 70 and 85. If you are 60 and a lender caps at 75, your maximum term is 15 years, which pushes up monthly repayments compared to a standard 25-year term.

Lenders assess retirement income including workplace and state pensions, investment income, and rental income from other properties. You will need to demonstrate that your income comfortably covers the repayments throughout the term.

Several specialist lenders now offer retirement interest-only (RIO) mortgages. With a RIO mortgage, you pay only the interest each month and the capital is repaid when you sell the property, move into long-term care, or pass away. This keeps monthly costs low while still allowing you to borrow.

If you are over 55 and have substantial equity, moving home mortgages designed for older borrowers may offer more flexibility. A whole-of-market broker can access lenders that high-street banks do not offer directly.

Porting means transferring your existing mortgage deal to your new property. If you are on a competitive fixed rate with time left on the deal, porting your mortgage can save you from paying an early repayment charge (ERC), which typically ranges from 1% to 5% of the outstanding balance.

However, porting is not always the best option when downsizing. Because your new property costs less, you will need to borrow less, and lenders may require you to pay down part of the loan. Some lenders do not allow porting to a lower loan amount at all.

Even when porting is possible, a new mortgage deal could work out cheaper overall. If current fixed rates are lower than your existing rate, the savings over the term could outweigh the ERC. A broker will compare both options side by side and factor in every cost to show you which route saves more.

You also need to pass the lender's affordability checks again when porting. If your income has changed since you took out the original mortgage, approval is not guaranteed. Starting fresh with a different lender might give you access to more flexible criteria.