Equity release could offer a mainstream solution to downsizing, says our financial expert.

Invitations to a succession of birthday parties have dropped through our letterbox over the past six months, prompting responses ranging from surprise to quiet reflection.

“Is John really 60? Goodness. I remember his 40th!” 

Such an event took place at a good mate’s house last month. One party guest was a lady I hadn’t seen in almost four decades. We read the same subject at university together and now here she was, with her husband of 30-odd years, talking about her daughters to my wife, whom she had never met. Over the course of the evening, a long-standing – if suspended – friendship was given a new dimension as two became four, each of us enjoying the fact we had so much in common.

All four of us contributed heartfelt concerns and still burning ambitions to a varied conversation which covered topics ranging from children and travel to future retirement plans and, in the case of our new friends, downsizing.

It transpired that the pair have lived in the same house for virtually the whole of their married life. Their girls were each born and grew up there. School friends regularly stayed over; family birthday parties were hosted in the garden; summer holidays planned in the kitchen; Christmases celebrated in the living room.

Yet this joyous snapshot was infused with melancholy after the pair explained they may have to sell their house, despite it being home to a thousand happy memories.

With a retirement bucket list as long as your arm, the couple were convinced that the only way they could realise their plans was to sell up and downsize. There was genuine sadness in their eyes as they explained this, looking at each other but recognising only a reluctant concurrence. They desperately want to stay where they are.

Briefly, their obvious despondency silenced our lively chatter. In the ensuing silence, it became apparent that perhaps the greatest disadvantage of downsizing is the emotional wrench which accompanies the decision to move. Yet while moving to live in smaller accommodation is an option, it’s not the only one.

“Have you looked into equity release?” I ventured, before being asked to provide a little more information.

In short, equity release enables homeowners aged 55 and above to convert a portion of the wealth built up in their homes, usually over many years, into tax-free cash. The process involves a form of borrowing, often in the form of a lifetime mortgage. However, unlike a traditional mortgage, there is no contractual obligation to repay a penny: the outstanding lifetime mortgage is settled either when the homeowners die or move to full-time residential care and the property is sold.

To explore how much equity could be withdrawn as tax-free cash, browsing the Equity Release Supermarket website could prove rewarding, particularly for homeowners aged 55 and over wishing to remain in homes full to the brim with happy memories. The website is home to the unique smartER platform, which provides comprehensive, real-time, equity release-related information.

I explained the importance of assembling the full facts before doing anything. Releasing equity can affect your entitlement to means-tested state benefits, but on the other hand it can also offer a mainstream solution to downsizing.

This brief technical interlude ushered a welcome smile back to our new friends’ faces. Our conversation was soon back in the groove. James Brown urged everyone to Get Up Offa That Thing. So we did. All four of us. What ensued was probably the happiest reaction to a chat about equity release ever.

For more financial advice, check out Peter Sharkey’s regular blog, The Week In Numbers.

This column is for general information only and cannot be relied on as financial advice for individuals. Consult your professional adviser.