Three tough choices aged 39

mixwell

I hope this is the right place to ask for some advice, inspiration etc

We have a mortgage that runs to 2026 and has about 121k to be paid, currently on variable rate and paying around £1050 monthly.

We have decent equity in our house, the house is worth about £425k and hence we have a theoretical £304,000 to our name if we sell up.

So where is the issue? Well the house we are in isn't a house that will significantly increase in price, its restricted in size and suits a young family, we have young teenagers now and need to move on to something bigger. We have also found a more expensive house that we like.

We can fairly easily move to a slightly cheaper area of the same town or nearby and buy a house for about £330-£340k - using savings etc. we would then become mortgage free and hence would be able to save what we are paying for a mortgage immediately.

Moreover as our house is not going to gain more value I have a nagging doubt that paying the mortgage for the next 15 years will end up costing me a huge amount more than it should - i.e 15 years at even at a low rate £12,600 is going to be £189k when the outstanding balance is almost half that....have I got my maths wrong here or is this reality?

So I see that we have two options:

1. Sell up ASAP, get maximum value for our house which as its in the best part of town should be possible from the 'yummy mummy - cash on the hip - set in the shires who want to get into the better schools and then change locations to maximise our equity while also getting a bigger house. Hope this house at least holds its value and then save like mad for a few years, safe at least in the knowledge that we own our house outright and we are not wasting good money.

2. Second option, is to upsize our house and buy a house around £499,999 that we think has potential to be hugely improved, take out another mortgage to cover the extra bit and pray....
Assuming this house can increase in price, we think its got huge potential - it could be worth £600k in a healthy market. Of course the risk is increasing rates making life harder fairly soon, that said if its an investment then it could be worth it.

So I guess what I am seeking is some advice on whether staying in a home for a long time (we have been here 10 years) is bad financial management, should I be looking to sell up and make the most of the money I have made here or should I be looking to move upwards.

Any help would be gratefully received.

hcb42

I am in a similar position, and want to downsize to reduce and get rid of mortgage ASAP rather than paying another 14 years...We could in theory borrow significantly more but I wouldnt want to. I want to be comfortable knowing that if either of us cannot work, or chooses not to work we can easily live on one salary. We earn about £88K between us, which means with a lower/no mortgage we can really enjoy a bit of life when we want to and save hard for retirement too.

I guess it will depend on your motivations ultimately.

And yes, your maths is right.

mixwell

Many thanks, funnily enough our combined wage is about the same, hence its such a confusing situation to be stressing about paying off a balance over 15 more years that we will earn in 24 months!

There has to be a better way!

hcb42

yes it is lol..

My plan is to overpay from end of 2011, (just had a 4month career break) but realistically this will only knock a couple of years off the end. I just want to be mortgage free now so I am not just living to work but also to protect us should one of us fall ill - and I believe we can still get a decent sized 3/4 bed house for us with room for the occasional guest(s)

There is no way I would take on more debt but I will say my hubby is nearly 50. I am 43, so a bit older than you are

RosieTiger

mixwell wrote: »

2. Second option, is to upsize our house and buy a house around £499,999 that we think has potential to be hugely improved, take out another mortgage to cover the extra bit and pray....

Any help would be gratefully received.

In all honesty, I would not be seeking advice from these boards on a decision like this. This is an investment decision you are making and probably the most important one of your life! If you seriously believe that option 2 would involve praying, then you surely can't consider it a valid option???

From your post, it doesn't sound like you have made your mind up on exactly what you want. If you want to grow the value in a property as much as possible, then it could be worth considering, provided you are willing to face selling should finances force the issue at some point.

Either way, you are in a very good position.

I was once told a very good piece of advice, which I would recommend. Sit down and discuss what it is you want to achieve and how you want to live, it might just make your final decision easier.