To be or not to be mortgage free?

PipPip

We have two young kids (aged 2 and 4) and have been living in Paris for 3 years as I moved here on a short term contract for my employer. We kept our 4 bed detached house in the UK (Bristol) and have tenants in but have just put it on the market for £450k as I will return to work for my employer in Hampshire. We have a £217k mortgage on the house, so approx £180k of equity assuming we actually sell for nearer £400k. We have also saved around £145k during the last few years, mostly in a offset account.
So we face decision time. We plan to live in or close to Winchester and we could either carry over our mortgage to buy a large 4 bed detached close to central Winchester for around £500k or I can see we could afford a pretty nice 3 bed detached in a reasonable village a couple of miles from Winchester centre for around £320k with no mortgage. I am tempted to do this as with bonuses and no mortgage to pay we would have the capacity to save something like £40k per year if we did this and could always extend or move later as the kids grow bigger, whilst retaining mortgage free status. Would you "make do" with a smaller 3 bed house a couple of miles from town in our situation or keep the mortgage and go for a bigger place nearer the centre? I can't decide, my heart says go for a big forever house and be done with it but my head says we don't need a big house yet as the kids are still young and with interest rates bound to rise it is better to be mortgage free than have a bigger house. My wife says she is bored looking after a big house (our rental house in Paris is huge) and would be perfectly happy in a smaller house, so there is no pressure from her.

originalmiscellany

Small house and be done with it
Wife doesn't want a big house - you don't know what the future will hold...
Any chance of expanding this house upwards or outwards? Being mortgage free would be spot on, no pressure on you or your wife, you could possibly even cut back on hours, to allow you to spend more time with the children, e.g. pick them up from school once a week? No brainer!

dimbo61

well having no mortgage and ability to save £40K a year would be a nice place to be and then if you do need a bigger place in a few years you might have enough money saved to pay cash!!
Hope you have enjoyed your time in Paris

kingster2069

I would also go for a smaller mortgage if I was in your position. I don't think house prices are moving north at a fast rate for a few years, yet I think interest rates are likely to move north sooner. Having cash assets should start to our strip inflation soon.
Also less cleaning and more money to have fun with the family discovering Winchester. Hope the move goes well and you enjoy your little ones.

RosieTiger

Whichever will work so no idea why your asking.

mdeebee

RosieTiger wrote: »

Whichever will work so no idea why your asking.

The OP was asking because he wanted to know what people thought!

This is a forum, after all.

Secret_Saving_Squirrel

Think I would go for the small one and have wonderful family holidays and a saving pot for contingencies.

Squirrel

tjp70

Smaller house, happy wife, contented kids and money in the bank. Sounds pretty good to me.

diable

Go for a smaller house but look for something that can be extended either upwards out the back or the side as its usually cheaper to extend then it is to move.

PipPip

kingster2069 wrote: »

I would also go for a smaller mortgage if I was in your position. I don't think house prices are moving north at a fast rate for a few years, yet I think interest rates are likely to move north sooner. Having cash assets should start to our strip inflation soon.
Also less cleaning and more money to have fun with the family discovering Winchester. Hope the move goes well and you enjoy your little ones.

Obviously none of us can predict the future but I do feel that the scenario you describe is the most likely. Also I think being mortgage free will derisk the return to the new job - no guarantee that it will go well and its quite a step up for me. I can't see us changing from camping holidays in France to luxury holidays in the Maldives though - we are a family of simple needs and always watch the pennies
I've discussed with my wife and we've agreed to give small house, no mortgage a go. Just needs to sell in Bristol now. That could take a while.

liuhut

But at least you will have the option of the holidays in the Maldives!!
Good luck with the house sale in Bristol, if it doesn't sell quickly, is there an option of renting a three bed in a village to see how you find it...if you have been used to a large house is Paris, it might be a bit of a shock space and storage wise with kids to go to a smaller place?
Hope the move goes OK
L.