Around 15% of homeowners are considering downsizing during the next five years, according to a MoneyAge article from April 2025. If you’re thinking about moving to a smaller home and still have a mortgage, here’s what you need to know.

There are plenty of reasons why you might want to downsize now or in the future, including:

• Reduced living costs
• To move closer to family or services
• Easier maintenance in your later years
• Adult children moving out of the family home
• To release equity to fund retirement or gift to loved ones.

With the figures suggesting around 6.3 million adults in the UK want to downsize soon, getting to grips with what it could mean for your mortgage might be essential.

Understanding how much equity you have in your current home

If you have a mortgage on your current home, one of the first steps to take is to calculate how much equity you hold.

Equity is how much of the property you own. You can work this out by getting an up-to-date valuation of the property and subtracting the outstanding mortgage balance.

For example, if your home is worth £400,000, and your outstanding mortgage balance is £150,000, you have £250,000 equity in the property. In this scenario, if you downsized and purchased a property for less than £250,000, you could become mortgage-free, and you might even have money left over to fund retirement or pass on to your loved ones.

However, moving to a smaller property doesn’t automatically mean it’s less expensive.

The location of the home you want to buy is likely to play an important role in the cost. If you’re moving because you want a home that’s suitable for your later years, a bungalow might be attractive but also could come with a higher price tag.

So, in some cases, you might need to take out a mortgage even though you’re downsizing.

When taking out a mortgage to downsize, lenders will assess your affordability to meet repayments.

One key factor you might need to consider is your retirement date. Often, lenders will want your mortgage term to end before you retire. So, if you’re moving to prepare for giving up work, you might need to choose a shorter mortgage term, which could increase your mortgage repayments.

As a mortgage broker, we could help you search for a deal that suits your needs and answer any questions you might have.

You could choose to port your existing mortgage deal to a new property

If you have an existing mortgage and you’ll need to borrow money to buy your new home, you might choose to port your current mortgage.

Porting your mortgage means you can purchase a new home and stay on your existing deal or rate – it’s not the loan itself that’s ported, but the deal.

The key benefit to porting a mortgage is that you won’t need to pay exit fees or an early repayment charge (ERC) by leaving a deal before it expires. If you already have a competitive interest rate, it’s a way to keep this even when you move home too.

It’s not always possible to port a mortgage, so it’s something you’ll need to speak to your lender about. If your circumstances have changed, your lender might not offer you the same terms you currently have.

If you plan to port your mortgage but will need to borrow more to buy your new home, this is usually done by “topping up” your current mortgage. This new borrowing may have a different interest rate.

While porting your mortgage could be right for you, it may still be worthwhile to shop around and see what new deals could be available. You may find that a deal with a lower interest rate offsets the fees you might pay.

Contact us to talk about your mortgage when downsizing

If you need to take out a mortgage when downsizing, please contact us. We can help you assess your options and offer guidance when you’re ready to apply for a mortgage.

Please note:

This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.