Five-bedroom homes could be cash pots for downsizers

Homeowners of five-bedroom properties who don’t have a mortgage could unlock a substantial cash pot by downsizing, according to recent research.

Analysis from property portal Rightmove has highlighted the cash-equity release opportunities for those ready to downsize to a smaller home, before moving costs such as stamp duty and conveyancing.

On average, larger property homeowners outside London could release £498,687 in cash by downsizing from a five-bedroom to a three-bedroom house, based on the current average asking price for these types of properties.

Five-bedroom properties have seen substantial price growth over the past decade.

Homeowners who purchased their properties in 2014 have experienced on average a 36 per cent increase in the value of their property.

London movers who own outright could release the most in pure cash terms due to the higher expense of housing in the capital, with potential equity release reaching as much as £1,062,087.

Potential movers from the north east gain the most proportionally, recouping 65 per cent of their five-bedroom property value, the highest percentage of any region.

Downsizers in East Anglia could unlock 58 per cent of their five-bedroom property value – still a significant cash return.

Not only could the release of cash from a home be a motivator for an empty nester to downsize, but so too could the substantial savings on energy bills.

Rightmove analysis shows that downsizing from a five-bedroom, less energy-efficient EPC E rated house, to a three-bed more energy efficient EPC C rated house could save homeowners an average of £3,806 a year in energy bills.

If 150,000 larger households made this move, over half a billion pounds a year could be saved by these downsizers in energy costs for them to potentially spend elsewhere.

Releasing cash also offers downsizers potential funds towards the renovation, extension or remodelling of their next home.

Tim Bannister, Rightmove’s property expert, says: “Downsizing is a sensitive topic for many homeowners, as emotional ties and the inconvenience of moving often deter them from selling their family homes.

“However, empty nesters may overlook the significant benefits of downsizing, such as reduced energy bills and increased cash from purchasing a smaller home, that can still cover moving costs with leftover returns.

“By transitioning from a five-bedroom to a three-bedroom house, homeowners could still retain spare bedrooms for guests and free up on average half a million in cash for other uses before moving costs.”