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Bigger house or no mortgage
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If I were you or your wife I'd be going for the bigger house.
A 2 bed terraced is ok with 2 adults and just one child, but if you ever have another, or even if you want a dog or an indoor hobby, it will start to feel smaller! Also, most terraces round here only have yards rather than gardens, does yours? As little one gets older you will probably really appreciate more outside space for them to play/entertain school friends etc.
Caroline is right that this is a good time to do it, you're in a good position and there's nothing pressing you to make a rushed decision, you can buy well.
Hoploz is also right in that you might be glad you did it in 30/40 years. Both my parents and grandparents both 'stepped up' several times while younger and earning, and then downsized in their fifties/sixties when the nest was well and truly empty, freeing up a lot of equity to enjoy their retirements!0 -
We went for the bigger house and mortgage when our two kids were very young.
We were mortgage free at the time.
Overall it was the right decision for us but there were sacrifices and many of them landed in my lap. We moved further away from my work (a stressful but good, flexible job that pays well) which made childcare drop offs and pick ups really hard. I also increased my days from three to four/five per week depending on work demands to make the move affordable. The first few years for me were difficult and I did resent my husband for insisting on the house move when the practical and financial burden landed at my feet.
We are a year from being mortgage free again though in a house worth twice as much as our old one. I am looking forward to the peace of mind this will bring and I won't be talked into another mortgage without looking at all the pro's and con's and how these will be addressed by the two of us.The resentment I felt towards my husband in those early years didn't cause long term damage to our relationship ...but it could have done and I won't risk that again.
One option could be a doer upper? Buy cheap but bigger and do up over a number of years to make this more affordable.
Whatever you decide I would look at the financial and practical pro's and con's of each option (not forgetting the psychological impact of any sacrifices) and how you as a couple will address them. If the burden falls squarely on the shoulders of one individual to make this affordable/workable then the decision should ultimately be theirs, in my opinion.0 -
It's simply something you and your wife need to work out between you, as you both want different things.
Our story, for interest:
We moved to the bigger house a year ago. We were three years away from being mortgage-free in our mid-30s. But we could afford the bigger, long-term house and went for it. We're still able to overpay in the big house and aim to be mortgage-free in 14 years. We don't regret it for a minute.
If we'd stayed in the other house, we would have had a lot of spare cash each month and would have had to come up with an alternative investment plan for it. This would have involved a lot of research which, frankly, we're both too lazy for.It's just easier to plough money into a bigger house.
Our new house cost about 2.5 times as much as a retirement bungalow in our area. Our old house cost only slightly more. So, come retirement, we'll have the option to downsize and free up a large chunk of equity as the relative prices of bigger houses and smaller bungalows should remain roughly similar. The alternative would have been a house worth about the same as a retirement property and that money being in other investments.
The bigger mortgage was daunting. The ways I felt better about it were:
1. We still borrowed sensibly, not taking the maximum mortgage the bank would lend us. This is why we're still able to overpay a good chunk each month.
2. We bought on a hugely popular estate where houses always sell very fast. This means that if life throws up a disaster (serious illness, long-term unemployment, etc), we could sell the house and downsize well before we got into financial trouble. We did consider a rural property to get out of town, but one of the downsides would have been that it would have been harder to sell, if the need arose. I'm confident that if circumstances change, we can offload this house. We have plenty of equity in it so even if the market dips and we sell for a bit less than we paid, it's OK.
On the basis of the above, we were happy overall with the risk level we were taking.
The way to look at the interest you pay on the mortgage is that it's 'buying' you the gain in property value that comes with it. How much interest have you paid on your current mortgage? I bet it's less than the £50k your house has appreciated by. Now the market does of course go up and down so this gamble doesn't always pay off, but historically it has in the long term (20-30 years) pretty reliably, ie you should get back what you pay in interest.
If you don't want to borrow then your options are cash savings, which are simply no good over the long-term as you're lucky if they keep pace with inflation, let alone actually grow in value, or other investments (shares, bonds, etc etc).0
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