Should I Downsize To Pay Off Mortgage ?

gaz1000gaz

Hello from a newbie to this great site. I hope you can help me.

We own a house worth £425,000 and a ski apartment worth £60,000. We owe total mortgage of £225,000. Our mortgage payments are £2500 per month (fixed rate mortgage at 3.5%) over 9.5 years remaining.

We are not quite struggling to pay the mortgage, but we are both self employed in the property market which isnt paying much bonus at present !

We are thinking of selling our large 5 bed barn conversion and buying a 4 bed detached modern house in the same area we currently live. We will walk away with £250,000 clear after fees we hope. 4 bed detached houses in the area go for £230-£250,000 so we could pay cash - hopefully.

It really seems to make sense to become mortgage free, and save £2500 pcm on mortgage payments, just means buying a smaller house again, but we only have 2 children - so should be ok.

We have worked hard to live in our current house of 5 years, and we are aged 35. It feels like a backward step, but it does seem to make sense. I hope the feeling of freedom will outweigh the negatives.

Can anyone help me with your thoughts please ?

Thanks for reading.

Regards

Paul

chirpchirp

I know this isn't really MSE advice but if you have struggled so far to have these two residences would it not be better to extend your term so your mortgage payments are less per month although you would pay more in the long term?

Lady1981

Hi gaz1000gaz

I have a flat with my boyfriend and we are saving for a house. We are currently trying to decide whether we want the slightly bigger and better house in a nicer area or the cheaper version in an ok area. It's just me and my other half and we are unlikely to have children, just a dog.

We are finding it a really tough decision, especially as I have spent the last 4 years looking at beautiful and very expensive houses on Rightmove

I just keep thinking that when I'm old and grey(er!) I won't be thinking that I wish I had lived in a bigger house, I will be thinking I wish I had holidayed more, seen more of my family etc. I think that there are restrictions on some of the important things in life - time especially -
if we are slaving away to pay off a larger than necessary mortgage.

Having said all of that, I would still love a lovely house

Good luck and I look forward to hearing other people's replies and what you decide.

Lady xx

gaz1000gaz

Thank you both for your replies. Last May, we purposely reduced the term of our mortgage from 15 to 10 years, so we dont want to extend it again and incurr more interest. So we need to decide whether to stay and find £2500 pcm or move to a smaller (but perfectly fine !) house within a few miles - town rather thank village that we are in).

Im probably 60/40 in favour of moving and paying off the mortgage but on my mind all day ! The children can stay at the same schools which makes this process a lot easier.

When i read these posts back that i have typed, it seems so easy to see the right answer which is to move ! but its such a hard decision.

Thanks again. I hope we can see some more suggestions too.

Paul

THRIFTY_GIRL

gaz1000gaz wrote: »

Hello from a newbie to this great site. I hope you can help me.

We own a house worth £425,000 and a ski apartment worth £60,000. We owe total mortgage of £225,000. Our mortgage payments are £2500 per month (fixed rate mortgage at 3.5%) over 9.5 years remaining.

We are thinking of selling our large 5 bed barn conversion and buying a 4 bed detached modern house in the same area we currently live. We will walk away with £250,000 clear after fees we hope. 4 bed detached houses in the area go for £230-£250,000 so we could pay cash - hopefully.

It really seems to make sense to become mortgage free, and save £2500 pcm on mortgage payments, just means buying a smaller house again, but we only have 2 children - so should be ok.

Paul

1. Do you need the ski apartment? is it likely to increase much in value in the future? you are paying interest on £60k at 3.5%, with the good euro rate you could save £2100 pa interest and repayments on this? a lifestyle decision worth considering maybe?

2. Current value of house may be £425k but have prices dropped much due to the recession? do you risk being priced out later if you want to upsize back? 3.5% is a decent interest rate, like chirpchirp said, maybe better considering increasing the term instead....really think about your long term requirements.

Savings rates are quite poor at the mo; but there are a few ISAs worth considering...maybe extend the mortgage term and put the amount by which mortgage has reduced into an ISA. Then mortgage is effectively being paid off at the same rate and doubling up as an emergency fund.

dimbo61

Hi gaz I live in one of them modern 4 bed detached houses and even though there are nicer bigger houses on my estate I am happy with my little 3 storey property.
I have 2 teenage kids who have there own space so if you can get a good price for your 5 bed barn conversion and want to be mortgage free why not put the place on the market at £30K over what you want and see what happens!
I live near the kids school and they have some good friends nearby

SimbaSimon

gaz1000gaz wrote: »

Hello from a newbie to this great site. I hope you can help me.

We own a house worth £425,000 and a ski apartment worth £60,000. We owe total mortgage of £225,000. Our mortgage payments are £2500 per month (fixed rate mortgage at 3.5%) over 9.5 years remaining.

We are not quite struggling to pay the mortgage, but we are both self employed in the property market which isnt paying much bonus at present !

We are thinking of selling our large 5 bed barn conversion and buying a 4 bed detached modern house in the same area we currently live. We will walk away with £250,000 clear after fees we hope. 4 bed detached houses in the area go for £230-£250,000 so we could pay cash - hopefully.

It really seems to make sense to become mortgage free, and save £2500 pcm on mortgage payments, just means buying a smaller house again, but we only have 2 children - so should be ok.

We have worked hard to live in our current house of 5 years, and we are aged 35. It feels like a backward step, but it does seem to make sense. I hope the feeling of freedom will outweigh the negatives.

Can anyone help me with your thoughts please ?

Thanks for reading.

Regards

Paul

While I see how it can be a backward step as we strive to get the biggest and best thing possible. However if you can make do with a smaller house and your lifestyle won't change it makes perfectly good financial sense to do so. £2,500 pcm is a lot of money! You could easily build up considerable savings with the mortgage paid off and that could give you and your family a better lifestyle even with a smaller house. You just need to figure out whats more important for you. Could you perhaps go halfway and find a house between £250,000 and £475,000? Giving you a small mortgage but a big'ish house?

gaz1000gaz

Some good ideas. As i need a push in the right direction, can i ask for a simple one word answer - would you move or stay (stay meaning - stay at my present address and perhaps increase the term). What would you do.

MOVE or STAY ?

Thanks all,

Paul

Bufger

MOVE

(Less stress = happier you = happier family = better environment for kids)

Raini

Move

(I suspect that you have already made the decision but want others to confirm it. What's the joy in a huge house which you're pressured to pay for, you have to decide what's the most important thing for you, but life is short!)

dimbo61

move
buy a property for less than £250,000 you will have enough expense to move anyways