Pay & Save now or live a bit now ?

duck&dive

Hello all. I hope this question suits this Forum. My pension planning hasn't been the best! I am in my mid fifties and will retire at 67. My private pension will amount to a meagre 3-4K per annum, my state pension about 8K ... so not great. I have a house worth about 300K but I only own just over half, the rest being mortgaged, i.e. 140K mortgage, about £950 per month on a 30K salary.
Should I persevere with this large mortgage (large for me) which leaves very little for holidays, house maintenance or plain old socializing? OR, should I resort to plan B. This involves selling my house for a smaller one around 230K-250k, dropping my mortgage to 70K ? This will give me a 'better' life now in terms of enjoyment BUT the gains made on the bigger house would be greater (despite the financial hardship of a heavy mortgage) and then I could downsize later, at about 70 yrs - if the good lord spares me that long!
Either way, the smaller house option or keeping my larger home, I will pay off the mortgage by retirement at 67. I am single. I have no children or dependents. I have no other debts. what would you folk do in my situation, live now or live later?

Stubod

Dropping from a £300k house to a £250K one initially may not give you any spare money as you will have to factor in all the moving costs, (and stamp duty?).

However if it was me and I could find a smaller / cheaper house that I liked, I would certainly look to "downsize". Over time I think this option gives more flexibility with the "extra" money, (and the opportunity to invest / pension . pay off mortgage early etc).

I would not want the hassle of doing it all when I was 70, (besides who wants to wait until they are 70 before they start "spending"?)

duck&dive

Thanks Stubod, - I'm starting to agree with your last line of comment, i.e. why wait until 70 before spending a bit - but prob just the way I've been brought up to think I've got to save until I drop. I'm by myself so who am I saving for ?!:beer:

justme111

so your take home pay is about £237OO
out of those you spend about 11 5OO on a mortgage leaving about 12 k. your private pension plus state pension will be about that so you will not have any drop in living standard.
Now about to sell or not to sell question - depends on many variables - what you likely to find for 23O-25O k , is it going to be your forever home- if not than it could be preferable to downsize straight to that one to avoid unnecessary transaction costs for little gain. Your mortgage seems a bit high as well , what is the rate ?
I would be tempted to go for something cheaper if I could find something suitable because it looks like too little gain for the amount of expense involved.

enthusiasticsaver

I would definitely sell now and release yourself from that huge mortgage. Use the money saved to improve your lifestyle and save for retirement by paying extra into your pension.

kidmugsy

Why not keep the bigger property but take in a lodger, using the Rent-a-Room allowance to avoid income tax on the rent? It would avoid the ridiculously high cost of trading down.

crv1963

I'd downsize now whilst still working, sort the new house how I'd like it, save a bit more for when retired, live a little more for now, if no dependents you can afford to be a bit more selfish/ self loving.


Plan a bit for when you do retire, it doesn't need to be complicated just satisfying to you, work out what you think you'll need when retired and work backwards to what you will need to save/ have coming in. Pensions would cover current expenditure but leave little room for manoeuvre if something exciting/ or expensive came along.

k6chris

If you are going to downsize then downsize in a significant way, otherwise with the cost of moving, legal fees, sales fees and stamp duty you will not achieve anything. How about looking for a small house that you could do up over time?? Would your job allow you to move to a cheaper part of the country?? Just thoughts.

justme111

at the end of the day it is up to you- is your money better used by giving you an opportunity to enjoy your present property or will you get more enjoyment out of it in a way of spending money.

duck&dive

Thank you to my respondents. Seems like most suggest downsizing to free myself from some of my mortgage debt. I've considered the rent a room route but to be honest I don't know if I could have a stranger under the same roof (me = fixed in my ways and not given to disruption. -the luxury of using the bathroom with an open door would be hard to surrender-!). My current mortgage is fixed for 5 years at 2.09%. Downsizing to a property with half the mortgage (from £140 to £70) would give me an extra £500 in my pocket per month. So it is tempting ... and being single without dependents what have I got to lose ? Thank you all again. 'Change is good', especially when it's change in my pocket.

Lummoxley

You say you currently have a house which usually implies more than one bedroom yet you don't want to share your space. What use do you make of any spare rooms currently?

I'd suggest that if you are not using one or more rooms in your house consider the downsizing option.

You are not under any time pressure so consider what you want and where for the next twenty+ years. Befriend some local EA's who'd sniff two lots of commission. Then spend some spare time readying your current home to market quickly if your dream property comes up.