Mortgage nearly finished - do we start again?

stedwell

Hi
Here is something I have been thinking about for a while - I would appreciate any viewpoints on it. It is only a thought at the moment!!!

My hubbie and I are both teachers - 43 and 47. Our mortgage part and part is due to end in 6 years. However we are finding it hard in our comparatively small modern house. Yes it has 4 bedrooms but very small and an integral garage so no downstairs space. Due to a spate of young bereavements in our family we are becoming very much of the opinion of "go for it now" - a phrase which we would not usually associate ourselves with.

Therefore we are considering extending our mortgage over as long a period as possible (Can you go over 65?) so we can buy a more spacious house (But not a mansion by any means!) The view is that we would probably never own it but would sell it and buy a smaller property when the children were older. (12 and 8 at the mo). Putting the payments over a long period would make them affordable (Probably looking at 180,000 mortgage - double what we have now).

A bigger house just around the corner has come on the market needing lots of work so it is cheap. Would you consider it? Thanks in advance for any thoughts. :undecided

lynnexxxo

Have you thought of converting your intergral garage and making downstairs larger? A lot of my neighbours have done that and (from what they tell me) it costs between 5 - 10 k.

I don't mean to sound rude, but if you have four bedrooms and only 2 kids, is it possible your house is somewhat filled with junk. Could you have a big clear out and then re assess the space you have?

A_Nice_Englishman

Borrowing another £90,000 will cost, um, about £500 a month on an interest only basis. If you did that for say 10 years and interest rates stayed the same that's £60,000 altogether. Then you need to add in the cost of the work on your proposed purchase.

You might get the £60,000 +back when you sell if the value of your proposed purhase rises that much more than your exsiting house. Then again, you might not.

What could you do with the £500 a month if you spent it?
What could you do with a lump sum of well over £60,000 in ten years time if you saved the £500 a month?

ixwood

Cheap houses that need work would be be ideal, let alone put me off. Assuming it is actually cheap, even considering the work needed. Do the big/messy stuff before you move and everything else as and when.

stedwell

To convert the garage would give us more downstairs space but then we would lose storage which we already struggle with! I am aware that 4 beds sounds good for our family but the 4th room isn't really a room and the others are very small. We have no hall, one reception room and a kitchen downstairs. We do try to clear out regularly (Cat bootie only yesterday) but you know what kids are like and our hobbies too!

Would you borrow the 90,000 on interest only rather than repayment? What would be the benefits of doing that?

A_Nice_Englishman

stedwell wrote: »

Would you borrow the 90,000 on interest only rather than repayment? What would be the benefits of doing that?

You said you were considering "extending your mortgage over as long a period as possible". Interest-only is in effect an infinite term - you don't make any monthly repayments of capital. Plus, it made the sums easier!

stedwell

Yes I see that. I have had such bad experience with endowments I run when I see the word!

ixwood

IO is the best strategy IMO. Long term most investments should beat the mortgage rate and end up paying less. Especially if you start "overpaying" early, to get a good sum going and compounding in your favor.

Repayments are a certain rip off and IO is a gamble. You could do better, you could do worse.


Also IO, could in theory provide a decent lumpsum/retirment as well, on top. Once it equals your mortgage, you let it roll and don't settle up. In 5 or 10 years you could have a big excess.

Of course, it has it's risks, but potentially the best gains.

I'm IO btw. In case you couldn't tell.

stedwell

sorry - financial numbskull here! IO???

ixwood

Converting is the way to go if you've got the space IMO. Avoid all the fees/taxes/hassles of buying and selling.

I know a garage has value, but not as much as extra living space. I remember they used to say years ago that extra rooms added 10k. It must be loads more now. To wok it out I guess you just need your existing price per square foot and how much extra footage you'd get. I bet it;s be a lot.

Or just do it on a room basis for ease. price/8 (or whatever you've got) rooms * number of new rooms.

A_Nice_Englishman

stedwell wrote: »

sorry - financial numbskull here! IO???

IO = Interest Only.

I like to think I'm quite savvy financially but don't quite follow ixwood's argument I'm afraid.