Should you move house if you’re mortgage free?

Rachaelc14

Hi,
So my mum and dad will have finished paying off their mortgage next year and my mum has always wanted to downsize to a 2 bed bungalow now that her kids are grown up and living away. My dad however is very stuck in his ways and likes the idea of being financially secure and owning the home. I am on my mums side when it comes to the discussion of moving as I think eventually when they are older they will want/need to move anyway Because stairs become an issue and also the estate we live on, well the majority of it is council owned so neighbours will be families with kids which I don’t think they’d want at 80+ years old.
I would like advice so that I can advise them on whether it’s a good idea to move or not once they have finished their mortgage next year. The house they have now will be worth around £100k and they only pay £350 a month mortgage so my issue is that yes they may have an extra £350 in disposable income but realistically that isn’t a lot and I know that will soon get spent willy nilly each month. So they won’t necessarily be benefiting with a hefty extra amount of money each month once they’ve finished.
I told my mum they could put 30/40% deposit down on a new bungalow that’s priced at £170k as selling their house at 100k they could use around 60-70k of that as deposit so their repayments can be lower and essentially can keep 40-30k for themselves as savings/profit. They have never had savings before and have always just scraped by so I think that is where their worry for moving and having loan debt comes from but I can’t help but feel it would be a good financial decision if they did move as my mum would finally have her perfect home and the extra cash they can have left over from the sold house would put them in a financially secure position for a while which they’ve never had.
Any advice? As I don’t know myself what would be the right plan but I just don’t see how having an extra £350 a month disposable income is beneficial to my dad when they could grab themselves some savings by selling and be in a home that would be adaptable for retirement as I don’t want them getting to 80 and having to move to a rented property because they can no longer have access in their current home.

getmore4less

How old are they?

phillw

Rachaelc14 wrote: »

I told my mum they could put 30/40% deposit down on a new bungalow that’s priced at £170k as selling their house at 100k they could use around 60-70k of that as deposit so their repayments can be lower and essentially can keep 40-30k for themselves as savings/profit.

It's not savings, you should only do that if you can guarantee the rate you're borrowing at is less than the rate you can get by treating it as savings. It may be possible if you are willing to take risks, but you need to understand the risks.

Moving to a more suitable property might be a good idea, but the idea of savings seems delusional.

Nebulous2

Buying a more expensive house and keeping 'savings' is effectively equity release. Just like we see on here where people remortgage their house to buy a car or pay a holiday its taking on extra debt to free up spending money. If they can readily spend an extra £350 a month then they'll easily manage to work through £30k as well. Meanwhile they'll be paying interest on that £30k

Their age, as said above is crucial, because they may have a limited time to pay a new mortgage, bumping up the monthly cost.

We're in the middle of a downsizing plan, which involves moving to a cheaper area. As bungalows go at a premium we couldn't see any advantage in moving from a bigger house to a smaller bungalow and not freeing up any cash.

They don't need a new bungalow. There has to be a compromise which is cheaper than moving from an ex-council house at £100k to a new bungalow at £170k.

What can you get nearby for £120k? Anything she fancies that would be more suitable as they get older?

They could sell at £100k, put £90k into the new house, £5k for fees and moving costs, keep £5k for an emergency fund and have a new mortgage for £30k instead of the £100k you're looking at.

Sea_Shell

Don't forget to factor in all the costs of moving, which can soon mount up. Fees, taxs, removals.

I guess they need to think long and hard about whether they CAN afford to borrow the additional £70-£80k that they'll need, and over what timescale. *Edit - sorry just realised they're considering borrowing £100k to keep the difference!!! That'll make things even tighter.

Are there even any suitable properties in their area. around here Bungalows are very rare (on the open market) as they seem to be bought purely to be developed/extended into unaffordable large ones or houses!!! And they are expensive generally for what you get.

Again how old are they? Still working? Retired? What income do they have to support any borrowing?

Thrugelmir

Rachaelc14 wrote: »

I would like advice so that I can advise them on whether it’s a good idea to move or not once they have finished their mortgage next year.

Tell them not to rush into a decision. £350 of extra spending money every month can pay for a few treats and luxuries. There's something very satisfying when the mortgage is repaid. Topping up ones pension can come in handy too.

Rachaelc14

Hi all, thanks for the responses. My mum is 51 and my dad is 52. They are both in full time employment and my dad has a secure pension, he’s receiving one next year from a job he had before his current job, and has his pension now with his current job that’s he’s been in for 20 years now.
I think my mums issue is that she isn’t happy here, the house when they bought it was only £25k and they’ve had it since their 20’s. The only bungalows around that are of fair price are those that need a lot of work doing to them, such as ones where they’re very outdated from previous owners and even those ones are at 100k so I wouldn’t know how to factor in price of doing these up. Other than that, there’s only new builds which like mentioned are a real downsize and overpriced for what you get!
Is it possible if they were to buy a bungalow for £100k that they can then borrow money (like a mortgage) to do the house up? As this was something my mum did look into and thought about doing as they seem to be the only prices similar to what her house is worth, but I don’t know much on how it would work if they needed to borrow money to then do it up. She did mention some friends of hers have an extended mortgage from borrowing extra to do their house up so can that work if you bought the house outright?

At the end of the day I just want her to be happy when retiring which will probably be at 65-68yrs old and I would hate if they missed an opportunity now and later in life be unable to do anything due to being too old to take out any loan.
Thanks guys

getmore4less

Rachaelc14 wrote: »

...
The house they have now will be worth around £100k and they only pay £350 a month mortgage...

Rachaelc14 wrote: »

My mum is 51 and my dad is 52
...
I think my mums issue is that she isn’t happy here, the house when they bought it was only £25k and they’ve had it since their 20’s...

That does not add up.

Bought a house 20-30years ago for £25k now worth around £100k and have a current mortgage of £350pm


I think you need to get the time line of this mortgage for the last 20-30 years those number are way out for anything sensible.

The usual cause of this is equity release to provide spending money.

even the last 5 years may give a clue.

5 year loan paying £350pm starts out at around £20k

AnotherJoe

Could they have done something dumb like stay on the SVR since the start?

getmore4less

AnotherJoe wrote: »

Could they have done something dumb like stay on the SVR since the start?

Unlikely over 20 years,

Interest only for a long time then repayment might account for £350pm

Interest rates have been low for 10years even a generous 5% 100% 25k mortgage would be £265pm

£350pm would be around 7year term