Mortgage free or luxury house?

ConservatoryCal

Hi guys. I’m new to this so not sure what to expect. Just wanted to ask a question and to see what everything thinks. So the situation is.. a few years ago I bought my first house at 21 for 89k, flipped it and sold it just over a year ago for 120k so had a nice bit plus savings to put into my current house, currently living in a 3 bed detached house with a garage, it’s nice but for me it’s not something I look at when I reverse off my drive in the morning for work and think ‘I’ve made it’. What me and my wife have discussed is saving up a lump sum, selling our current house, and putting both funds together to buy a ex council outright for around 90k again with no mortgage and doing the same, flipping it so we can take that 120k again and keep building it. That was the plan, to keep doing it until we had a nice chunk to buy a forever home and be mortgage free. However, I understand it would take a lot of messing around, a lot of moving around all the time to keep flipping houses and it would also not give our kids a chance to actually settle in a house. I’m now 25 and I want to me mortgage free ASAP, in our forever home, or in a home that we will stay in until the kids move out (20 years time or so). However one thing came to mind today which has kid of changed my way of thinking. If I take that 90k and instead of buying houses outright to flip and keep moving, do I put this down on a house for around 350k as a nice deposit, and stretch myself for a house we will stay in or do I do what we originally agreed? The only reason I ask which I put to my wife today, is that a house that costs 350k today, by the time we have finished flipping houses and have 350k to buy out right which could be 10 years time, that house could then be worth 500k by that time and we would still be in a position of having to save more again! Houses price are always going up so do I buy now when x house is 350k, stretch on my mortgage payments and pay interest as well (which won’t accumulate to the 150k extra I would have to pay if I waited to have the money in full even if interest rates did increase over the years ) and then we get the value increase of the new house in our pockets instead of having to pay it, or do I do what we originally said and keep flipping and building on that lump sum? I hope this makes sense, I may have gone around it in a round about way.. any thoughts?

Cornish_mum

Hi

This in my two pence worth. We bought and sold frequently between 2004-2015 (4x) and actually we made zero on this approach once we took into account interest and moving costs (stamp duty, legal and estate agents fees). However we didn’t actively seek to add value, didn’t do any sharp practices like gazundering and our moves were driven by external life events rather than a desired to build equity. My cousin did the same thing run as a proper business renovating as she went and made it work for her but she treated it like a job and it was a lot of work. We built equity by overpaying as much as we could when we could.

We now our almost 40 and pushed ourselves to buy the best house we could afford (comfortably) 5 years ago (still not the dream house) and I found the big mortgage quite stressful. I don’t want the dream house anymore, I’d rather have time with the kids and a less stressful life. I was very motivated previously to have a nice house and had planned detailed renovations of our current property to turn it into the dream house. Since my son developed a disability my priorities have radically changed.

So my advice is think about the long- term, factor in all the costs (emotional and monetary), and be ready for the unexpected. Good luck

bexster1975

Hello

I must say, that all sounds like a lot of hard work ( and that was just to read it!).

What does the " I've made it" house look like/cost? The flipping idea is ok, until you don't make £30k on each one due to change in market conditions ( local or UKwide). Could you get a mortgage on your " I've made it" house now, then work hard to pay it down?
I appreciate this sounds a bit dull, but it is very effective. And ultimately risk free. At 25 you still gave quite some time to enjoy mortgage freedom, even if it takes 15 years or more to get there.

Just some thoughts.

Good luck whatever you do. (P.S. "Ive made it" houses rarely seem to be to remind yourself, but to tell others - just a point of view).

Bexster

twinklie

I couldn’t cope with the moves and the uncertainty.

We stretched ourselves for our forever house. We absolutely love it and it was worth it after wasting money renting for so long. Both my children have ASD and the space this house gives us inside and out just works for us in a way a smaller house wouldn’t.

It’s not without its drawbacks and money isn’t something we have left over at the end of each month. BUT, we don’t really go out that much for days out (well not places that cost money anyway). We are very much creatures of routine (as most families with ASD individuals are), so it works for us.

I’m not crying poverty by a long shot, there’s plenty we could cut back on. And I only work 3.5 days per week. However, there’s no holidays abroad or things like that.

You have to look at what would work for you.

badmemory

What about finding an area where the schools are good for the sake of the children & do you really want them to be moving schools every couple of years?

lulabelle1

I guess the reference to "I've made it" is fairly subjective.....

I would decide on the 350k house purchase based on affordability; current income, outgoings, available deposit, mortgage term, respective mortgage payment and then factor in whether you'd still have enough left over to live, accrue an emergency fund and fund your future self.

On the one hand, it makes sense to buy the "dream" house sooner than later if you're financially able to, but not to the detriment of saddling yourself with a huge mortgage and not being able to live a full life now and investing for your future self.

I agree with everything Cornish mum says - I was the same, aspired to the "forever/dream" home. And then, life comes along with its twists and turns, and if you're lucky you realise what's important sooner than later, and then all that stuff goes out of the window.

Sayschezza

I moved several times renovating as we went. Got to the large 4 bedroom detached then got divorced and finished up in a house nearly the same as the one we had started with. Was only my name on the deeds though and that turned out to be the house that I really and truly loved. Met OH and had to upgrade again due to size, then moved again to the area I wanted to spend the rest of my time. Still hanker after my little house so long story to say, size doesn't really matter.

enthusiasticsaver

Personally I would not want to keep moving every few years because it is disruptive and it is expensive paying solicitors costs and moving expenses. I would purchase a house as close to what you call a "forever home" can be and reevaluate when you actually need to move. When you say forever do you mean position or size? Some people seem to think they have to keep moving to a better area and more expensive house and never seem to be happy with where they are living.

Let me give you a few examples. Three couples (ourselves included).

We bought our house 30 years ago and it had enough bedrooms for us and was in a nice road close to the schools we wanted for our children. I never thought it was a forever home any more than the house we had previously but it was nice and good enough for right now. It still is. It was at the top of our budget but we did not overstretch to buy it. We were mortgage free by 50 and retired by 58. Would have been sooner with no kids but I don't regret them

Second couple moved to a very expensive house about 10 years ago, their kids are the same age as ours and they are paying a fortune to service it and it is half empty as the kids have moved out. They tried to move house but the housing market is stagnant down here especially for large expensive houses so they are stuck paying a large proportion of their occupational pension on keeping it going and their original plan was to use it as a pension and downsize but selling it is problematic so they cannot access their pension. As they took on a larger property only 10 years before retirement they did not do as we did and invest more in our pension which we can access whenever we like and they had a mortgage for longer than us. Consequently their retirement is relatively frugal whereas we can afford holidays and have more spare money.

Third couple again moved 10 years before retirement to a forever house which they have been renovating forever. Kids moved out and they cannot afford to retire as they focused on the house rather than a more rounded way of securing their future.

The message I have taken from this is the more people keep upsizing or upgrading their house the poorer they become until eventually they are sitting on one expensive asset they either don't want to sell because they have spent so long renovating it and getting it right for them or it is so expensive the slow housing market means they are having problems selling it.

I would also say that houses do not always go up in value. Speak to the many people who bought in 2008 and are still in negative equity. Do what is right for your family at the time and forget about "forever homes" or whether you have "made it" and just focus on making a home which is right for now. We have extended our home and improved it and it works fine for us now and even better knowing we have not made some solicitor or estate agent rich by constantly buying and selling houses.

Lomcevak

My view is pretty similar to enthusiasticsaver's. I'm 45, and have only owned two houses, a tiny two-up, two-down purchased for £60k in 1997, and my current house, a fairly modest 4-bed semi in a lovely place, purchased for £300k in 2006. When we moved we spent what we could afford, overpaid once we could afford it (balanced with pension plans), and 13 years on we're a few months away from being mortgage free. Both plan on retiring in about ten years or so. We had kids young, so our eldest two are at university already, and even our youngest will be done with university before we 'retire'.

Our house isn't perfect, and we'd really like one more room and some more garden - our garden is much bigger than most modern houses, but i'm a bit of a gardener at heart and would like the space. However, it's in a stunningly beautiful village, it's almost paid for, and anything significantly different is £200k+ more ... and moving is so expensive and stressful. So we're pretty content really.

So I guess my thought is to not be too worried about the 'perfect' house. Like enthusiasticsaver, I know people in million-pound houses (which aren't all that grand down here) drowning under a mortgage they'll be paying until their late 60s or early 70s - plus the perfect house tends to be accompanied by other expensive lifestyle choices too. Find the right thing, minimise transaction costs, and get rid of the mortgage as soon as you can. There's a lot to be said for sleeping well at night and having plenty of disposable income

Lomcevak

It’s not something I look at when I reverse off my drive in the morning for work and think ‘I’ve made it’.

One other thought, picking up on this one, is that it's worth thinking about what "I've made it" really means to you.

We're all different and it's fine if it really is having the house and car, but they're a trade-off against other things. Don't get bounced into it just because it's "expected". The most unhappy people I know have the house and car. Having to stay on the career ladder for another thirty years to pay for them is usually why they're unhappy

ConservatoryCal

Thanks for your replies and input guys! They have all really helped massively and they are very much appreciated! I think after a reading all your opinions and a good chat with the Mrs, we aren’t going to stretch ourselves too much, we’re going to save up a big deposit, and just take out half a mortgage on a decent 250kish house for now, we obviously spoke about how it would affect the kids moving all the time and messing around and doing this will also give us more money each month to take them on days out and on holidays etc and still and a nice half paid for house rather than stretching ourselves too much to the point of being under pressure all the time! I did want to stretch and go for the big house and I didn’t think my opinion would change but after reading your guys view on things, from people who have more life experience than myself, it has swayed me not to be so admit to put so much pressure on getting the big house right now, plenty of time for that, thank you all again so much!