Mortgage free or a bigger house?

JackeeBoy

Hi all

For as long as I can remember I have always wanted to be financially comfortable with little to no burden. I have always had it in my head that I would be mortgage free before I am 45 and I am somewhat on track being 29 and having 16 years left on my mortgage.

I would like to get your opinion on my current situation. My wife and I purchased our home 3 years ago in what was probably the cheapest borough in London. We both like the area and it's very convenient getting around in a car (next to the M25) or by public transport being close to a station and 30 minutes from Liverpool Street. We did overpay for the property paying around £285,000 for a two bedroom, mid-terrace but in needed very little work doing (just painting for personal preference) and it's probably worth between that at £300,000 today. There is £249,000 left on the mortgage.

When we initially got the house, we were earning between us £60,000. Our broker told us we could borrow a lot more than we had a get a bigger place (or stay closer to home) but we decided to live well within our means. On top of this, we also had a 4.5% interest rate to deal with as we could only do a 5% deposit at the time making our payments in excess of £1,450 a month. On a joint £60k salary, we were okay with the payments so when it came time to remortgage, we kept the payments the same but took 6 years off it.

Our current situation is that we now have a joint salary of £85k, we have a young child and quickly realised that 2 bedrooms is what you need for probably one couple, let alone a couple and a child. With that said, we like our house, happy with the location but know we probably have to either buy somewhere bigger or extend into the roof if we are to have another child. The latter of which we can afford to do, paying what we are currently paying, but this would be extending the term of the mortgage.

The downsides to living where I do are -

- No driveway (though this can be fixed by the council cutting back the grass area which they have done for the other cul-de-sacs.
- Small living room
- Mid-terraced. We had new neighbours a few months back and they can be quite noisy at night).

We are also looking to try for another child next year and with that comes 3 years (at least) of sky high nursery fees (which we are currently paying for the first). Take the nursery fees away and we can comfortably save £1,000 per month towards a loft extension. My initial plan was to stay in the house, convert upstairs to a master bedroom and have the 2-3 children in the bedrooms downstairs. Or, should I be selling up, extending the mortgage and buying somewhere bigger? I even had a friend who converted his property to an interest free mortgage and bought somewhere bigger and is making a significant sum on his second property.

Any tips?

PS. Sorry if the post is a little incoherent. Do let me know if you have any further questions.