Doubling Mortgage at nearly 40 - is it worth it?

natman

Ok here goes - I will try and keep focused-
Background - I am 39 years old, my wife is 38, we have a daughter who is nearly 4. We live in the North west England
We have a mortgage on our house. Our house is worth approx £205,000 we have an oustanding balance of £77,000 mortgage and pay £450 a month. So loan to value is very good at 38%. Additional information - we fixed 5 years ago and extended the term of our mortgage as we knew having a baby / child would have costs so we increased to 20 years from 15 years. we spend £250 on nursery fees a month.

ok new situation -

Seen a house at £280,000, if we sold our house we would need approx £150,000 mortgage. This is roughly double what we currently have. we want our payments to be under £600 so our term would need to be around 29 years.

so the question - At 39 years old, is it wise to double your mortgage, increase your term and increase your payments?
From an investment point of view what is better? To have a house worth £205,000 owing just £77,000 or having a £280,000 property and owing £150,000. Or is it just the same. Though monthly my payments would increase by around 30%.
My plan to retire early is achievable in my current house as I would pay my mortgage off in say 15 years. But it would be nearly 30 years when I would pay off the new monies. If obviously I stayed and did not down size.

So I guess the question remains - when all the info highlights paying off your mortgage should be a priority. Is it ever worth doubling your mortgage amount when you get to nearly 40??

Suarez

You will obviously pay a considerable amount more in interest.

From an investment point of view it would be a really poor decision as you are getting no income from it. It is a your home so it's more of a personal choice than investment choice.

Goldiegirl

What do you want more - to retire early at some date in the future, or to live in a bigger house now


It's a personal choice really - and 39 isn't exactly old - if you are going to do it, better do it now than in 10 years time

natman

Thanks for your replies we have played with calculators etc, and yes it is viable to do what we are doing etc, we both work full time, not on mega money but both earn approx £26k each.

we live financially 'ok' at the minute, but when our daughter goes to school this will free up some funds. we could just stay and go wild and pay off our mortgage like crazy and have it paid up in 12 years or so.
This giving us a house worth say £215,000, being just over 50 and having no mortgage - what a dream..........

But like the comments above - I do want something a bit better, a bit bigger, a bit nicer , want to improve our families life that little bit more...but that means our long term goal / plan changes. But is it for the worse or is it for the better?

I agree about not thinking about it as an investment but i guess it would roughly be equal - using the very approx figures below
to stay in current house - at age 55 own house worth £220,000 no mortgage zero monthly mortgage payments

to move in bigger / more expensive house - at age 55 house to be worth say £300,000, but have outstanding mortgage of £80,000 paying say £600 a month.

I could down size at that point

However the journery over the 15 / 16 years would be better in the 'better' house...(hopefully)

Suarez

natman wrote: »

to stay in current house - at age 55 own house worth £220,000 no mortgage zero monthly mortgage payments

to move in bigger / more expensive house - at age 55 house to be worth say £300,000, but have outstanding mortgage of £80,000 paying say £600 a month.

Your also forgetting the savings from the lower mortgage interest payments.

natman

Yes, I get that Suarez and should have really factored that in....The new house is potentially in a better area and the are has been earmarked for redevelopment so the more exensive house could actually increase in value more. we just dont know

being mortgage free at 55 is my actual real goal.... I have been pondering this for the last couple of years... ha ha....

My head tells me to stay, overpay the mortgage and retire early and focus on my daughter when she then would be leaving school etc. Buying more expensive houses and working until I am 70 is really a shock to the system, but you only live once......

Though i cant make a decision on it!!! ha ha

chelseablue

I'm 32 and going from an outstanding mortgage of £92,000 to a mortgage of £230,000 (moving from a flat to a house)

Bonkers? Yes quite possibly but Im sure the journey will be interesting :rotfl:

natman

chelseablue wrote: »

I'm 32 and going from an outstanding mortgage of £92,000 to a mortgage of £230,000 (moving from a flat to a house)

Bonkers? Yes quite possibly but Im sure the journey will be interesting :rotfl:

This post has probably helped me the most.... That someone out there is as bonkers as I am:j

Seriously though I am interested what was your -
£92,000 monthly payments and over what term?

what is your
£230,000 monthly payments over what term please.

Just interested in the comparison - have you more income coming into the household now?

I dont you see, well I do have the nursery payments coming to an end in 7 or 8 months to offset the total but no more income.

Waldorf_Statler

disagree with Suarez.

if house prices continue to rise then you are making % profit on both your capital and the amount you borrow. in leverage terms it's the single best thing you can do. you will never be able to borrow money so cheaply as we can right now.

so, if house prices rise then it's the best investment you could make.

i've used the word "if" a few times there of course, deliberately so.

i'm going to do what you're proposing to do sometime in my mid-40s. only way to stretch to the house we picture ourselves living in with teenage kids. taking away the investment aspect, and boiling it down to sentiment, then it's about what home you want to live in and whether the extra mortgage payments are worth the sacrifices you will have to make elsewhere.

frazell

I'm 39 and we were considering doubling our mortgage at the end of last year. Figures were somewhat higher than yours but that's largely because we are down south (IMO). So that must make me the mentalist of you all.


Another option you might want to consider would be to rent your current house and use the equity as a deposit to your new house (or Let to Buy). We did that ourselves 5 years ago and now have a rental under our belt.


Depends really if you can be bothered with being a landlord, what the rental is like in your area, the implication of the new tax changes on buy to lets, using a limited company as a tax vehicle, problem tenants etc etc.


Its another option and lots to consider, but a decent advisor would be able to go through the options and figures for each.


If you did keep your first property and put it in a limited company for the long term then you could add your kids as shareholders and eventually pass it onto them.


Also, my personal opinion about mortgages is that as you are "only" 39, your earning potential will only continue to increase and with inflation etc the mortgage only becomes more manageable over time.


Quite possibly in 15years time, assuming you haven't borrowed additional money, whatever's remaining on your mortgage would be easily cleared with a few years salary. Just as my parents first mortgage in the 1960's was £7500, today, some people earn that in a month!


Food for thought anyway.

Thrugelmir

Waldorf_Statler wrote: »

so, if house prices rise then it's the best investment you could make.

It's a home not an investment.

When interest rates are low it's the time to clear debt not leverage up.

With a bigger house comes more expense.