Is it better to be mortgage free or buy bigger?

Tancred

Thrugelmir wrote: »

Borrow as little as you can and repay over the shortest possible term.

Few people take into account the amount of interest they pay over their mortgage term.

Interest is basically rent. If you can easily afford it then it simply doesn't matter. Even if you own a home outright you still have other bills, e.g. council tax, energy, water, etc.

laptop80

Isn't it mainly about being in the right house? If you need a bigger house then go for it, but if you're going to end up with a load of extra rooms you don't actually use just for the sake of status or because you think it's the thing to do then it would seem a bit silly to pay the extra interest & increase your bills unnecessarily.

The MSE mantra applies to houses just as much as anything else you buy - "Do I need it? Can I afford it? Will I use it? Is it worth it?"

moneyshoe

It depends a lot on your circumstances. We're in our early 30's with two young kids, we spend a lot of time in our house and garden, we don't go out much and we tend to spend holidays visiting family. If we had sunk our savings into buying outright we would be living in a smaller house in a less pleasant area. Yes we would have had lots of money to play with or save but that wouldn't really have affected our day to day quality of life as we have sufficient income to cover our needs at present. Yes we're having to do up the house ourselves and we can't afford foreign holidays but it's worth it for the amazing house we now have the pleasure of living in each day.

Surely if you are going to spend your money then what better to spend it on than the place you spend most of your time?

I think there is a big gap between mortgage free and mortgaged up to the hilt. We've pushed quite hard to be able to afford this house but we also know that my salary will increase significantly over the next five years and once the kids are in school husband will go back to work. We can see how we will have more money in the future even if interest rates rise.

phoebe1989seb

Tancred wrote: »

It depends on what you need. If you don't need the bigger house then don't buy it - simple as that! I have enough money to buy a flat outright but prefer to have a mortgage and live in a detached house. It's a bit like asking: buy a second hand Citroen outright or buy a new BMW with a loan.

Faced with that choice, I have to say I'd choose the Citroen......I can't stand BMWs

Now if you'd said a Mercedes, that might be different, but TBH I'd rather stick with our trusty Landy :D

Thrugelmir

Tancred wrote: »

Interest is basically rent. If you can easily afford it then it simply doesn't matter.

You can apply that statement to any single topic you like. At the end of the day personal choice as to how one spends ones money. Hare and the tortoise fable springs to mind. As interest is dead money. Not the same as rent. As there is a choice.

doughnutmachine

tbh, I think after a certain size a house just becomes too big to live in. When I was a kid I had to go down three sets of stairs to take dirty clothes from my bedroom to the washing machine. I live in a flat now and the washing machine is 10m from my bedroom

A smaller house is also cheaper to furnish/ heat etc

If you need a big house you should buy one, if it's just to impress people it's a bit silly imho.

jackomdj

Cornucopia wrote: »

Mortgage free is great.

I find it interesting that many people would think nothing of going down the mortgage-based upgrade route, but if you put the scenario where they were already mortgage-free with £200k in the bank, they would stay put.

(Spending the bank's money is easier than spending your own).

In that instance an offset mortgage would be perfect, giving you an interest free loan (obviously depending upon the mortgage rate and your savings interest rate).

Cornucopia

jackomdj wrote: »

In that instance an offset mortgage would be perfect, giving you an interest free loan (obviously depending upon the mortgage rate and your savings interest rate).

Does that actually work?

jackomdj

Yes. If you had an offset mortgage for £200,000 with £100,000 in your offset pot you would only pay interest on £100,000. Likewise if you had the full £200,000 you would not pay any interest. Deepening on the mortgage you may have to faff around so you only have your outstanding mortgage in your offset pot so you get interest on the balance (this is how ours would work if we were fully offset) but some may (not 100% sure) give you interest on the extra.

brcl1519

It’s always better to be a mortgage free, or if one needs mortgage then he should take a very less percent of money or the initial amount on mortgage so it becomes easy to pay.