Mortgage free or luxury house?

maff01

ConservatoryCal said:

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?

I would buy the biggest best house you could afford, enjoy it as a family and when the kids are say 20/21  they move out then sell. Bank your profits and downsize. That way you enjoyed the family life in a nice house growing older together but then that house has been increasing more than  a cheaper house would in theory. 

Do it. Go for it, Yolo! 

AgathaSquirrel

Your decision sounds very sensible. If you can overpay and free yourself from a mortgage in your 40s it will free you up to make decisions about the type of life you want to lead. I wish we had been in a position to do that but we all have to make the best of the circumstances we are given.

powerspowers

I think you need to weigh up how much of a risk it is having the bigger mortgage. How comfortable are your jobs, do you have any changes planned (kids, maternity leave etc). 

Will you be able to overpay? Have an emergency pot? What if one of you wasn’t earning, how long could you ride it out?

if the answers to the above are things you are comfortable with, I’d go for it, you have age on your side. 

Disclaimer - this isn’t what we did. My partner is 20 years older than you so we didn’t fancy big mortgage in 60s pushing 70s.

good luck with whatever you decide! 

jimjames

We were in a similar position at your age. When I was 30 we took that plunge, really pushed ourselves and bought the bigger house and haven't regretted it. We've been here for 22 years now, it's the only house the kids have ever known and was ideally placed for schools. They're now at the stage where they've left home (well would have done if it wasn't for Covid) so we can now move elsewhere if we wanted.

It seemed like a big risk at the time but we've been lucky that mortgage rates have been good since 2000 and we'll have cleared our mortgage in the next 12 months despite having a large extension built and adding to mortgage for that a few years back. I'd say that the stability of having the one house has helped, it's also more cost effective than multiple costs of moving/stamp duty/solicitors etc.

Billy_B_North

Why do you think that you can buy houses, sell them again, and make money? Are you talking about renovating and upgrading them to make a profit, or just assuming that you can buy a house for one price and sell it for a higher one?

That’s not likely to work. If there are houses for sale at £90,000 then why is anyone going to pay you £120,000?

They won’t, they’ll buy the £90,000 one instead.

MovingForwards

Doubt OP is taking any more comments onboard as they haven't returned since October 2019.

ElmoR

Not sure if this helps, but another person on the FIREside Chat thread gave me some reading tips...one is "How to Worry Less About Money" by John Armstrong, A School of Life book. Not that you have said you are worrying about money, but it goes into why we want things and our relationship with money. It's a great read and some of what you have written applies.

ElmoR